2 Energy Stocks That Jumped Over 13% This Week

These energy stocks saw major moves this week, as analysts continued to increase their target prices for both stocks.

| More on:
oil tank at night

Image source: Getty Images

Energy stocks Cenovus Energy (TSX:CVE)(NYSE:CVE) and Vermilion Energy (TSX:VET)(NYSE:VET) both received a major boost of over 13% this week. Both Cenovus and Vermilion started the week out around $15 per share and have grown to over $17 per share as of writing.

What happened?

Both energy stocks seem to have grown thanks to a boost in target price from analyst Travis Wood from National Bank. Wood believes Cenovus stock should have a target price of $25 per share, with Vermilion aiming for around $30 per share.

In the case of Cenovus stock, other analysts weighed in as well. Credit Suisse analysts believe the stock could reach up to $22 per share. So, that would give Cenovus potential upside of between 29% and 49% and give Vermilion up to 76% upside.

Why now?

There are multiple factors weighing in on the change in target price for Vermillion and Cenovus. These energy stocks had a major 2021, making strong acquisitions and synergies along the way. This all sets them up for a strong 2022, and commodity prices continue to rise.

In the case of Vermilion, analysts particularly like the Corrib natural gas project on the coast of Ireland. Analysts believe the deal is well timed, as it increased Vermilion’s stake. Not only that, but the company managed to get great terms thanks to be one of the very few large players in the region. It will remain a significant free cash flow generator, despite being a low-risk deal.

As for Cenovus, the company has been selling off assets to focus on shareholder value, and shareholders have been eating it up. It sold 337 Husky gas stations last month for $660 million, as well as its Tucker asset to $800 million. The company also released a strategic update, planning to allocate 50% of excess free funds flow in 2022 to shareholder returns. These sales will all be used to reduce debt.

So what?

There’s a similarity here that some Motley Fool investors may be missing. Both energy stocks have been finding paths towards clean energy solutions. Cenovus recently joined other oil companies in bringing greenhouse gas emissions down to net zero. Vermilion’s Corrib deal is also a clean energy initiative. So, these new strategies perhaps prove to analysts and investors alike that the companies are setting up for future revenue.

But what’s great is that both energy stocks have the cash to make these movies. Sales from Cenovus and free cash flow from Vermilion allow it to start the inevitable transition. And this is great news for long-term investors.

Now what?

Both Cenovus stock and Vermilion stock offer significant opportunities to get in while they’re still cheap. Analysts continue to bump their target prices. And yet Cenovus and Vermilion offer significant value for investors. Vermilion trades at 3.79 times earnings, and Cenovus has an EV/EBITDA of just 7.54. Plus, both offer dividends that you can lock in right now.

So, if you’re looking for energy stocks that will provide you with solid gains now, and in the future, I would certainly recommend Cenovus and Vermilion. Both saw major gains of 13% and up just this past week. But there are more double-digit gains to come, according to analysts.

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 Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool recommends VERMILION ENERGY INC.

More on Energy Stocks

Arrowings ascending on a chalkboard
Energy Stocks

Beat the TSX With This Cash-Gushing Dividend Stock

Canadian Natural Resources stock is well set up to beat the TSX as it continues to generate strong cash flows…

Read more »

energy industry
Energy Stocks

2 TSX Energy Stocks to Buy Hand Over Fist Now

These two rallying TSX energy stocks can continue delivering robust returns to investors in the long term.

Read more »

green energy
Energy Stocks

1 Magnificent TSX Dividend Stock Down 37% to Buy and Hold Forever

This dividend stock has fallen significantly from poor results, but zoom in and there are some major improvements happening.

Read more »

oil tank at night
Energy Stocks

3 Energy Stocks Already Worth Your While

Here's why blue-chip TSX energy stocks such as Enbridge should be part of your equity portfolio in 2024.

Read more »

Solar panels and windmills
Energy Stocks

1 Beaten-Down Stock That Could Be the Best Bet in the TSX

This renewable energy stock could be one of the best buys you make this year, as the company starts to…

Read more »

Dice engraved with the words buy and sell
Energy Stocks

Is Enbridge Stock a Buy, Sell, or Hold?

Here's why Enbridge (TSX:ENB) remains a top dividend stock long-term investors may want to consider, despite current risks.

Read more »

Gas pipelines
Energy Stocks

If You Had Invested $5,000 in Enbridge Stock in 2018, This Is How Much You Would Have Today

Enbridge's high dividend yield hasn't made up for its dismal total returns.

Read more »

Bad apple with good apples
Energy Stocks

Avoid at All Costs: This Stock Is Portfolio Poison

A mid-cap stock commits to return more to shareholders, but some investors remember the suspension of dividends a few years…

Read more »