In a time when energy security is a national priority, Chevron (NYSE:CVX) remains a giant in both traditional and alternative fuel production. Investors might consider buying the dip now in CVX stock as the company’s takeover of Renewable Energy Group is proof positive that Chevron is staying ahead of the energy-transition curve.
There are numerous signs of rising inflation today, but one stands out in particular. Undoubtedly, high gas prices are a common complaint among America’s consumers. Amid this worrisome backdrop, drillers like Chevron are being called upon to ramp up production.
At the same time, Chevron must evolve its business model as nations transition to more environmentally friendly energy sources. With a potentially game-changing acquisition, Chevron’s dedication to lower- carbon solutions is crystal-clear now. Moreover, the company’s valuation has come down to a level that opportunistic investors should find appealing.
What’s Happening with CVX Stock?
There’s no denying that energy companies will sometimes correlate strongly with commodity prices. Case in point: as the WTI (West Texas Intermediate) crude oil price briefly topped $120 in early June, CVX stock broke above $180.
Since then, the Chevron share price has retraced to the $140s. That’s not necessarily bad news, though, as it brought Chevron’s trailing 12-month price-to-earnings ratio down to 14.53.
In other words, value-focused investors should take an interest in CVX stock as it’s currently trading at a discount. Furthermore, income seekers will surely want to know that Chevron pays a generous forward annual dividend yield of 3.99%.
Prospective investors should also consider that Chevron is still an aggressive fossil-fuel driller. During 2022’s first quarter, Chevron’s worldwide net oil-equivalent production totaled 3.06 million barrels per day. Year over year, the company increased its U.S. net oil-equivalent production by 10%.
Let’s not focus exclusively on traditional fuel sources, though. If alternative energy sources will become increasingly important in the future, then Chevron is preparing for this in 2022.
In one of the most significant energy-market transactions of the year, Chevron finalized its acquisition of Renewable Energy Group in mid-June. Consequently, Chevron can now offer “an expanded suite of cost-effective, lower carbon solutions that utilize today’s fleets and infrastructure,” according to Mark Nelson, executive vice president of Downstream & Chemicals for Chevron.
To put it simply, Renewable Energy Group converts renewable resources into sustainable fuels. The company operates 11 biorefineries in the U.S. and Europe.
Chevron bought Renewable Energy Group in an all-cash transaction valued at $3.15 billion, so it’s evident that Chevron is serious about shifting to cleaner fuel sources. By 2030, Chevron plans to increase its renewable-fuels production capacity to 100,000 barrels per day, and the Renewable Energy Group acquisition should help the company achieve this goal.
Before the transaction was finalized, Chevron Chairman and CEO Mike Wirth seemed to suggest a value-added synergy between the two companies. “Together, we can grow more quickly and efficiently than either could on its own,” Wirth declared.
What You Can Do Now
Going forward, CVX stock investors should continue to monitor fossil-fuel prices. Yet, they should also prepare for Chevron’s ambitious transition to alternative energy sources.
At the same time, Chevron’s healthy dividend yield and reasonable valuation multiple ought to appeal to informed investors. So, don’t be afraid to take a position in Chevron shares today. The company is still an oil-industry giant, sure, but it’s also part of the global cleaner-fuel movement.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.