Chevron Corporation (NYSE: CVX) shares recovered slightly in early trading on Monday, after tanking on disappointing third-quarter earnings.
The overreaction to weak earnings wiped off 90% of the pre-deal value of Hess, according to BofA Securities.
The Chevron Analyst: Doug Leggate upgraded the rating for Chevron from Neutral to Buy, while raising the price target from $190 to $200.
The Chevron Thesis: While there has been investor skepticism around the Hess acquisition, CEO Mike Wirth has significant experience in "replacing large-scale spending with opportunistic M&A," Leggate said in the upgrade note.
The analyst mentioned that the successful completion of the Hess acquisition would reset the investment outlook for Chevron, making the recent pullback "a tactical opportunity to upgrade our rating to Buy."
"From here, we see the debate inevitably pivoting to how this will impact Hess' shareholders view of the deal, projected by both managements to close in 1H24," Leggate mentioned.
The recent collapse in Chevron's stock will "inevitably attract some backlash from Hess investors," he added.
CVX Price Action: Shares of Chevron had risen by 0.19% to $144.64 at the time of publication Monday.