Occidental Petroleum Corporation

OXY Details

A Look at OXY’s 3QFY20 Key Financial Highlights: Occidental Petroleum Corporation (NYSE: OXY) is a sustainable energy company with operations in the United States, the Middle East, Africa, and Latin America. As at 16 December 2020, the company had a market capitalization of ~$18.11 billion. During the quarter, the company reported a loss of 84 cents per share, as compared to earnings of 11 cents per share reported in the prior corresponding period. Revenues stood at $3,283 million, which decreased from $6,043 million reported in 3QFY19, owing to lower contribution from all segments. The company exited the quarter with a cash balance of $1,896 million, and long-term debt (net of current portion) amounted to $35,899 million. Cash flow from operations stood at $815 million, down from $1,863 million in the prior-year period. Total capital expenditure was $246 million during the quarter.

Quarter Results (Source: Company Reports)

Outlook: For 4QFY20, the company expects production to be in the range of 1,105-1,155 Mboe/d. Permian Resource production in 4QFY20 is expected to be between 360-380 Mboe/d. The company expects exploration expenses to be $30 million, for the coming quarter. To sustain liquidity amid the global economic crisis due to COVID-19 led pandemic, OXY plans to spend in the range of $0.7-$0.8 billion in 2H20 and $2.4-$2.6 billion in FY20.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Valuation (Source: Refinitiv (Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: In the last one year, the stock of OXY has corrected by ~49.2% and in the last one month, the stock went up ~53.1%. On a technical analysis front, the stock has a support level of ~$14.92 and a resistance level of ~$21.45.  Debt to equity multiple of the company stood at 3.81x in 3QFY20, higher than the industry median of 0.90x. We have valued the stock using EV/Sales multiple based multiple based illustrative relative valuation method and arrived at a correction of low double-digit upside (in % terms). For this purpose, we have taken peers like ConocoPhillips (NYSE: COP), EOG Resources Inc (NYSE: EOG), and Marathon Oil Corp (NYSE: MRO), to name a few. Considering the steep price movement in the past month, an uptick in debt to equity multiple, valuation, and Q3FY20 financial performance of the company, we suggest investors to book profit on the stock and give a ‘Sell’ rating on the stock at the current market price of $19.45, down by 1.97% on 16^th December 2020.

OXY Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Bloom Energy Corporation

BE Details

Announced Shield T3 COVID Testing: Bloom Energy Corporation (NYSE: BE) is an energy company, focused on providing clean, cost-effective, AlwaysON electricity for organizations and communities. As on 16 December 2020, the company’s market capitalization stood at ~$4.3 billion. The company recently partnered with El Camino Health to launch the University of Illinois’ innovative Shield T3 COVID-19 testing system and mobile laboratory at its manufacturing facility in Sunnyvale, California. The mobile lab, powered and hosted by Bloom Energy, is capable of processing up to 10,000 tests per day.

2020 Year-To-Date Financial Performance Update: For the first nine months of 2020, the company reported revenue of $545 million, down by 5% on pcp. Over the period, the number of acceptances reached 876, up 8% on pcp. The non-GAAP gross margin stood at 21.3%, up 2 percentage points on pcp. Notably, the company’s operating income is continuing to gain momentum.

2020 YTD Financial Performance (Source: Company Reports)

Outlook: Looking ahead, the company expects to see an increasing need for sustainable and resilient energy power sources that Bloom Energy’s technology provides. For FY21, the company expects its revenue to be in the range of $950 million to $1 billion.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Stock Recommendation: The stock of the company has provided a return of 73.57% in the last three months and 35.1% in the last one month. The stock is currently inclined towards its 52-weeks high price of $31.04, demonstrating the limited potential for further growth. On the technical analysis front, the stock has a support level of ~$22.01 and resistance of ~$28.22. We have valued the stock using the EV/EBITDA multiple based illustrative relative valuation method and have arrived at a target price with a correction of high single-digit. For the purpose, we have taken peers like Enphase Energy Inc (NASDAQ: ENPH), SunPower Corp (NASDAQ: SPWR), Array Technologies Inc (NASDAQ: ARRY), etc. Considering the steep price movement in the past few months, current trading levels and valuation, we suggest investors to book profit and give a “Sell” rating on the stock at the closing price of $25.88, down by 2.04%, as on 16 December 2020.

BE Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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