Why Talisman Energy Is Ready to Rebound

Does this analyst make a good case? Or is it just more noise from Wall Street?

The Motley Fool

While Fools should generally take the opinion of Bay Street with a grain of salt, it’s not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades — just in case their reasoning behind the call makes sense.

What: Shares of Talisman Energy (TSX: TLM)(NYSE:TLM) gained 1.5% on Thursday after TD Securities upgraded the oil and gas company from hold to buy.

So what: Along with the upgrade, analyst Menno Hulshof reiterated his price target of US$14, representing about 44% worth of upside to yesterday’s close. So while momentum traders might be turned off by the stock’s weakness in recent months, Hulshof’s call suggests growing sentiment on Bay Street that Talisman is becoming too cheap to pass up.

Now what: According to TD, Talisman’s risk/reward tradeoff is particularly attractive at this point. “This is the first time that we have been positive on the name since January 2013,” said Hulshof. “It has become increasingly difficult to ignore the fundamental gap between TLM’s share price and our estimates of underlying value (NAV and sum-of-the-parts or SOTP). In both instances, our calculations suggest that there is significant upside that is not being recognized by the market.”

Of course, with the stock still off more than 25% from its 52-week highs, those concerns might be giving patient Fools a solid long-term growth opportunity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Brian Pacampara owns no position in any of the companies mentioned. The Motley Fool does not own any of the companies mentioned.

More on Investing

A cannabis plant grows.
Cannabis Stocks

Canopy Growth Stock Is Rising But I’m Worried About This One Thing

Canopy Growth stock is soaring as the legalization effort makes real progress in both Germany and the United States.

Read more »

young woman celebrating a victory while working with mobile phone in the office
Investing

3 Roaring Stocks to Hold for the Next 20 Years

These top TSX stocks are excellent long-term buys, given their multi-year growth potential and solid underlying businesses.

Read more »

Two seniors float in a pool.
Dividend Stocks

TFSA: How to Earn $1,890 in Annual Tax-Free Income

Plunk these investments into your TFSA to earn passive income and avoid the taxman.

Read more »

grow dividends
Investing

Here’s My Top 3 TSX Stocks to Buy Right Now

Even though the TSX has been rising, there are still some good bargains out there. Here are three top compounding…

Read more »

Target. Stand out from the crowd
Investing

Prediction: This Canadian Growth Stock Could Double by 2030

Alimentation Couche-Tard (TSX:ATD) is a top growth stock that could do well over the next six or so years.

Read more »

Businessman holding AI cloud
Tech Stocks

Could Investing $20,000 in Nvidia Make You a Millionaire?

Nvidia stock has made investors millionaires in the last 10 years. Is it too late to invest to become a…

Read more »

Engineers walk through a facility.
Dividend Stocks

1 TSX Stock I Wouldn’t Touch With a 10-Foot Pole

AtkinsRéalis (TSX:ATRL) is one TSX stock I'd never invest in.

Read more »

money cash dividends
Stocks for Beginners

Have $500? 3 Absurdly Cheap Stocks Long-Term Investors Should Buy Right Now

If you're looking for cheap stocks, these three have a huge future ahead of them, all while costing far less…

Read more »