At first glance, ConocoPhillips (NYSE:COP), a major player in hydrocarbon energy, may seem out of step with the global push for clean and sustainable alternatives, given the increasing emphasis on reducing reliance on fossil fuels. However, with Russia’s ongoing military actions in Ukraine showing no signs of abating, it’s apparent that crude oil prices are likely to surge. This scenario is favorable for companies specializing in upstream operations like ConocoPhillips. Therefore, I find myself compelled to adopt a bullish stance on COP stock.
Math Points to a Northbound Direction for COP Stock
The heart of the argument lies in the uncertainty surrounding the duration of the conflict in Ukraine, solely known to Russian President Vladimir Putin. His apparent reluctance to pursue a legitimate peace agreement indicates a continuation of the conflict. This scenario likely translates into artificially constrained crude oil supplies, potentially benefiting COP stock.
Geopolitical analysts suggest that normalcy in Eastern Europe hinges on Putin’s defeat. Given his strongman persona, withdrawal from Ukraine seems unlikely, especially as he has escalated tensions, even mentioning the possibility of nuclear weapons use. While such remarks may be posturing, they underscore the seriousness of the situation.
With no apparent exit strategy for Russia, the conflict could persist until military resources are depleted, a process that may take considerable time given Russia’s extensive arsenal.
Economically, the situation is clear: Russia is a major oil exporter, and any disruption in its exports could lead to reduced oil imports by Western nations, supportive of Ukraine. Consequently, according to basic supply-demand dynamics, crude oil prices are poised to increase. As ConocoPhillips specializes in upstream operations within the hydrocarbon industry, COP stock stands to benefit from potential price rises.
Indeed, signs of bullish sentiment are already evident. Over the past three months, COP stock has surged by over 20%. Despite a hesitant start to 2024, the stock has gained nearly 16% since the year’s commencement.
Domestic Politics and Economic Matters May Help ConocoPhillips
Even if Russian military aggression were the sole factor, COP stock would still present an intriguing bullish opportunity. However, ConocoPhillips benefits from additional tailwinds, including favorable domestic politics and positive economic indicators.
Firstly, despite the broader push towards green energy solutions, the fossil fuel industry remains fundamentally significant. American infrastructure has long been reliant on hydrocarbons, and while renewable energy sources like wind and solar are gaining traction, oil continues to underpin global operations.
This underscores a crucial yet sometimes overlooked political reality. Particularly in a pivotal election cycle, neither the Biden administration nor the Democratic Party can afford to adopt an overly stringent stance against fossil fuels. The support of oil workers, who represent a considerable voting bloc, is essential. Many of these workers reside in swing states like Ohio, as highlighted in a Bloomberg report leading up to the 2020 election. Consequently, COP stock may navigate political terrain more smoothly than anticipated.
Secondly, on the economic front, another robust jobs report in March underscores a compelling equation: increased money chasing fewer goods, leading to inflation. Historically, such circumstances have favored critical resource sectors like crude oil.
This relationship is straightforward: as most Americans still rely on combustion-powered vehicles, rising oil prices necessitate increased expenditure. Oil, alongside essential resources such as food and water, is non-negotiable, compelling individuals to pay or face significant consequences.
As a result, COP stock appears resilient amidst economic uncertainties, rendering it an attractive investment option.
It’s Time to Revisit COP’s Fiscal 2024 Forecast
Considering the positive fundamentals, let’s reassess analysts’ expectations for ConocoPhillips in Fiscal 2024. They anticipate earnings per share (EPS) to reach $8.71 with revenue totaling $58.63 billion. While these figures appear disappointing compared to last year’s results (EPS of $8.77 with revenue of $58.57 billion), high-end estimates suggest a more optimistic outlook, with EPS projected at $12.98 and sales at $70.31 billion.
Given the broader context, it’s plausible that ConocoPhillips will perform towards the upper end of these fiscal projections. The combination of reduced supply and increased demand bodes well for COP stock.
Is ConocoPhillips Stock a Buy, According to Analysts?
On Wall Street, COP stock holds a Strong Buy consensus rating, backed by 16 Buy ratings, three Holds, and zero Sell ratings. The average price target for COP stock stands at $137.74, indicating a potential 4% upside.
The Takeaway
Although ConocoPhillips may seem like a fading hydrocarbon enterprise at first glance, a closer examination reveals a different narrative. Factors such as domestic politics, international tensions, and economic conditions are providing an upward catalyst for COP stock. With reduced supply and increasing demand in the equation, this upstream specialist warrants a reevaluation of its future outlook.
