Shares of Occidental Petroleum, a favorite of billionaire investor Warren Buffett, fell 2% on Monday after Goldman Sachs analysts downgraded the stock and warned valuations look less attractive after a massive rally and “sharp outperformance” so far this year.
Goldman downgraded shares of Occidental Petroleum on Monday from a “buy” rating to “neutral,” assigning the stock a $70 price target—implying roughly 15% upside from current levels.
“While we continue to see an attractive free cash flow outlook,” Occidental Petroleum’s valuation looks less attractive, especially relative to other energy companies and after the stock’s massive runup, says Goldman analyst Neil Mehta.
The energy giant is the top-performing stock in the S&P 500 so far in 2022, rising by over 90% thanks to the spike in oil prices this year, while the Energy Select Sector SPDR Fund is up only 22% during that period.
After Occidental’s “outperformance relative to peers,” other energy stocks are starting to have more compelling valuations, he writes, pointing to the likes of ConocoPhillips, which has underperformed with only a 16% gain this year.
Other large energy companies such as Exxon Mobil, ConocoPhillips, Hess and Pioneer Natural Resources all have far more upside—of about 40%, based on Goldman’s price target estimates—than Occidental, Mehta argues.
Shares of Occidental fell 2% to less than $60 per share on the news, erasing most of their gains from last week, when the stock rose roughly 3% as oil prices rebounded somewhat.