Devon Energy Stock Has 42% Upside, According to 1 Wall Street Firm

This is one of those unusual situations whereby a Wall Street firm lowers its price target on the stock, but even the lowered price target still implies a 42% upside for the stock. That happened recently when Siebert Williams Shank lowered its price target on Devon Energy (NYSE: DVN) from $58 to $50 while maintaining a buy rating on the stock.

The price target cut

The case for lowering the price target is entirely plausible. President Donald Trump has called for lower prices, OPEC+ has agreed to raise production, there are fears of lower global growth induced by the ongoing tariff conflict, and the new administration is encouraging oil production in the U.S.

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Why Devon Energy stock is a buy

While the bearish case for oil is valid, it's a good idea to point out two things:

• Oil is currently at almost $68 a barrel, traditionally an excellent level for oil and gas producers.
• Devon Energy management's guidance for 2025 calls for at least $3 billion in free cash flow (FCF) based on a price of oil of $70.

Image source: Getty Images.

Devon's market capitalization is $22.75 billion at the time of writing, and a price target of $50 implies a market cap of $32.5 billion. In other words, if the price of oil holds up, Devon will generate 13.2% of its current market cap in FCF and 9.2% at the target price of $50.

If you are agnostic about the price of oil, Devon Energy looks like a great value; if you are bullish on oil, it's a fantastic opportunity. It strikes me that even if you are mildly bearish, there's enough margin of safety to make Devon look like a good value.

The Wall Street firm's call makes perfect sense.

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Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.