Energy stocks got pummeled in 2017, with most losing value this year even though crude prices have rallied and are at their best levels in years. Because of that sell-off, analysts think that some oil and gas stocks are now significantly undervalued, with the following five currently sitting well below where analysts think they should trade.
| Energy Stock | Recent Price | Analyst Consensus Price Target | Implied Upside |
|---|---|---|---|
| Range Resources (NYSE: RRC) | $15.85 | $28.59 | 80.4% |
| Gulfport Energy (NASDAQ: GPOR) | $12.29 | $19.21 | 56.3% |
| Nabors Industries (NYSE: NBR) | $5.90 | $8.61 | 46.1% |
| Callon Petroleum (NYSE: CPE) | $10.96 | $15.69 | 43.2% |
| Energy Transfer Partners (NYSE: ETP) | $17.55 | $24.70 | 40.7% |
Data source: MarketWatch. Recent price as of Dec. 19, 2017.
Here's a closer look at why analysts believe these energy stocks could hit those price targets, which would make them big winners in 2018.
Image source: Getty Images.
A dirt-cheap natural gas stock
Natural gas producer Range Resources has gotten crushed this year, with its stock losing more than 50% of its value. That's mainly due to lower natural gas prices, which weighed on the company's earnings and caused it to water down its production growth outlook for 2018. That said, some analysts believe the stock has fallen too far this year, with Barclays, for example, upgrading Range to overweight in October and raising its price target from $18 to $24, saying that shares trade at their "most compelling level in years." Fueling that view is the expectation that Range's drilling results in the Marcellus shale will keep improving and that the company will earn returns as good as or better than rivals thanks to its prime position in that shale play.
Show me the money
Fellow natural gas producer Gulfport Energy also got hammered this year due to weaker gas prices, with its stock falling more than 40% through mid-December. Analysts believe, however, that Gulfport's stock could reverse course in 2018 if the company can prove that it can make money at lower gas prices. Imperial Capital, for instance, rates the stock an outperform with a $19 price target based on the view that Gulfport Energy can continue improving its operations and drilling economics, which should boost profitability.
Image source: Getty Images.
The light at the end of the tunnel
Drilling contractor Nabors Industries has tumbled a stunning 64% this year due to the unexpected slowdown in drilling activities after crude revisited the low $40s earlier this summer. Because of that, Nabors posted a bigger-than-expected loss in the third quarter, which caused debt to jump. While that poor showing concerned some analysts, a Jefferies' analyst upgraded the stock to a buy and raised the price target from $8 to $9. The analyst sees "incremental positives" for drillers, with the expectation that drilling activities and rig dayrates will improve in 2018, which should drive earnings higher.