Insider Sales At Chevron Are Nothing To Worry About
The insiders have been shedding shares of Chevron (NYSE: CVX) since Q4 of 2021 and their activity is gaining momentum. This might be a red flag if not for the fact insiders only own about 0.31% of the company, shares of CVX are trading at the highest levels ever, and oil prices are still on the rise. In our view, execs who bought shares when the company was down are getting paid for a smart move. With shares trading at record levels, who can blame them for taking some profits (other than congress because you know that coming, too)? In our view, the institutions are more of a bother and their activity may actually keep prices from moving too much higher.
Institutional activity over the last two years has been vigorous with net activity switching from bullish to bearish on a quarterly basis. This, and the 66% institutional ownership, suggest rotation to us which ultimately means volatility and range-bound action, all other factors aside. While there has been some volatility, price action in the shares has been moving higher on rising oil prices and the outlook for earnings. The most worrisome part of the institutional picture, however, is that selling picked up in Q2 and so far outpacing purchases by nearly 2 to 1. If this turns into a trend and extends into calendar Q3 it could push price action down toward $150 or even lower. The upshot is that, if the institutions reverse course and start buying in Q3, shares of this stock will probably reach a new all-time high before the end of the summer.
The Analysts Are Leading Chevron Higher
The analyst's activity has been a little mixed over the past few months and includes a price target reduction and downgrade or two. The takeaway, however, is the bulk of activity is bullish and has both the sentiment and consensus price target moving higher. The current consensus is a weak Buy, up from a firm Hold late last year, with a price target of $170.50. That target is only 2% above the current price action but is up in all three comparisons and moving higher. The last 6 analysts' commentaries, which include a price target reduction, all have the stock pegged above the consensus estimate and include the fresh high price target of $202. That target implies more than 20% of upside for the stock and that is not counting the 3.4% dividend or share repurchases.
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Chevron is expected to report FQ2 earnings at the end of July and the consensus figures are still rising. As it is, the analysts are expecting a 43% YOY increase in revenue with adjusted earnings more than doubling. Based on the high price of oil, gas, diesel, and nat gas we think these estimates are light. One reason we think the targets are light is that the outlook is expecting a sequential decline in revenue. Based on the oil price picture alone, the average selling price in Q2 is well above Q1 and should lead to a sequential increase in results.
The Technical Outlook: Chevron Is Pulling Back To Support
Price action in Chevron hit a peak in early June and is now pulling back to support along with other integrated oil companies. The near-term action smacks of a minor trend continuation that could take the price down to the $150/$160 region. Assuming this region is confirmed at support, Chevron is trading within a range and will likely begin moving higher again later in the summer. At that time either higher oil prices, earnings results, or both will underpin the market and result in a retest of the current all-time high at least. Until then, investors can sleep soundly while collecting the 3.4% yield.
Companies in This Article:
| Company | Current Price | Price Change | Dividend Yield | P/E Ratio | Consensus Rating | Consensus Price Target |
|---|
| Chevron (CVX) | $165.37 | +1.1% | 3.94% | 14.56 | Moderate Buy | $184.75 |
Experience
Thomas Hughes has been a contributing writer for InsiderTrades.com since 2019.
Areas of Expertise
Technical analysis, the S&P 500; retail, consumer, consumer staples, dividends, high-yield, small caps, technology, economic data, oil, cryptocurrencies
Education
Associate of Arts in Culinary Technology
Past Experience
Market watcher, trader and investor for numerous websites. Founded Passive Market Intelligence LLC to provide market research insights.
