List of stocks that have been upgraded by Merril Lynch
1. Marathon Oil Corp. (NYSE: MRO) to a buy from neutral, with a price target of $21, which is higher than the $18 consensus of various analysts. The new target price implies a gain of more than 33% from the current price of $15.7.
2. Noble Corporation PLC (NYSE: NE) from underweight to neutral. However, the target price of the stock is unchanged at $7.5, which is below the consensus target price of $8. The stock closed at $6.39 hitting a new multi-year low.
3. Patterson-UTI Energy Inc. (NASDAQ: PTEN) to neutral from underperform. The new target price on the stock is $22, whereas the consensus target price is also the same. The stock closed at $19.96.
4. Sasol LTD. (NYSE: SSL) to a buy from an earlier rating of neutral. While the consensus target price of the stock is $32.09, the stock closed the day at $27.71.
5. Devon Energy Corp. (NYSE: DVN) makes it to the US 1 list of top ideas for Merrill.
Notwithstanding, the valuations of the energy sector at 40 times its forward price-to-earnings (P/E) is more than double to the S&P 500’s forward P/E of 17, according to Yardeni Research.
Though the Merrill Lynch report agrees that “energy looks expensive on depressed earnings,” they believe that “higher oil prices should drive higher earnings estimates. Investors are still underweight the sector and the sector’s weight in the S&P 500 has fallen to historically bullish levels”.