Chevron is rising on stronger-than-expected earnings and the influence of the “Trump trade.” CVX has been trading within a flat range since early 2022, with the 130-140 zone acting as a lower boundary and 182.25-190 as an upper boundary. Over the last two years, however, this flat movement has gradually shifted into a downtrend channel, though the lower boundary has held relatively steady. Chevron may finally break free from this negative pressure due to anticipated fundamental changes.
Last week, Chevron reported earnings per share (EPS) of $2.51, surpassing the market expectation of $2.40. U.S. refinery throughput was 4.96% above expectations, and production was also 2.62% higher than forecasted. Chevron’s cost reduction initiatives and planned improvements at the Tengiz Field are also expected to contribute positively in 2025. Additionally, a Trump presidency could be a significant boon for the company. Chevron produces a substantial portion of its products domestically, which may mitigate the negative impact of tariffs. If Trump’s proposed tax cuts materialize, along with potential regulatory easing on U.S. drilling, Chevron could see substantial benefits.
One primary risk for Chevron in 2025 is potential downward pressure on oil prices. However, due to its unique structure, Chevron may be less impacted than many of its peers. Over the past two years, the correlation between WTI oil prices and Chevron’s stock price has been only 48.7%.
In terms of valuation, Chevron’s five-year average blended forward P/E ratio is 21.6x, significantly higher than its current 13.4x which is a significant positive for the share price. Chevron also has a valuation edge over its competitors. In the past two years, Chevron’s blended forward price to earnings ratio has been over 17% higher than its peers, while currently, it stands at an 8% premium, representing a 9% valuation advantage compared to other North American integrated oil companies.
(Chevron Daily Chart)
Chevron is currently testing the upper boundary of its downtrend channel, with upside pressure increasing, backed by strong fundamentals and recent changes. Volume is also beginning to rise, enhancing the potential for an upward breakout. The key level to watch is 160. If a breakout occurs, the main target could be the 182.25-190 zone in the coming weeks. However, if the upward momentum falls short, a short-term target at the 61.8% retracement level of 169 may serve as strong resistance. In the event of a rejection from the trendline, the 147-150 zone will likely act as the nearest support area.
