This report is an updated version of the report published on 20 January 2025 at 6.08 PM AEDT.

Devon Energy Corporation (NYSE: DVN)

DVN is a U.S.-based oil and gas producer with a diversified portfolio across multiple basins. The company focuses on the exploration, development, and production of oil, natural gas, and natural gas liquids (NGLs).

Upcoming Event: DVN has stated that it will disclose its 4QFY24 and full-year 2024 results on Tuesday, 18 February after the U.S. financial markets close. 

Recommendation Rationale – SELL at USD 37.95 

• Financial Highlights: DVN’s net earnings attributable to company declined by 10.8% YoY to USD 812mn in 3QFY24 vs USD 910mn in 3QFY23. Net cash from operating activities decreased to USD 1,663mn in 3QFY24 vs USD 1,725mn in 3QFY23.
• Trading Near the Resistance: DVN stock has surpassed its R2 level recommended on 24 December 2024. Therefore, share price can face resistance at the current levels.

• Overvalued Multiples: On a forward 12-month basis – key trading multiples (EV/Sales, Price/Book) are higher than the median of Energy sector.
• Market Risk: As an oil and gas company, DVN's revenue is highly dependent on the prices of oil and natural gas. Fluctuations in these prices can significantly impact the company's financial performance.

DVN’s Daily Price Chart

Valuation Methodology: Price/Earnings Approach (FY December'25E) (Illustrative)

Stock might trade at a slight premium to its peers considering the revenue growth in 3QFY24, increased production, expected production in 4QFY24, operational efficiency, and cost management. For conducting the valuation, the following peers have been considered: Crescent Energy Co (NYSE: CRGY), Matador Resources Co (NYSE: MTDR), Northern Oil and Gas Inc (NYSE: NOG), and other have been considered.

Considering that the stock has surpassed its R2 level, current trading levels, rally in share price movement, and risks associated, the share price can face consolidation at the current levels. Hence, a ‘Sell’ recommendation is given on the stock at the closing market price of USD 37.95, as of 17 January 2025.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical issues prevailing geopolitical tensions. Therefore, it is prudent to follow a cautious approach while investing. 

Note 1: Past performance is neither an indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is 17 January 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: Dividend Yield may vary as per the stock price movement.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice. 

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: In general, it is a level to protect further losses in case of any unfavourable movement in the stock prices.