12 oil stocks Goldman Sachs thinks has big upside potential

12 oil stocks Goldman Sachs thinks has big upside potential

Some of the most well-known oil stocks have further room to run amid elevated oil and gas prices, says strategists at Goldman Sachs.

And they point to several fundamental factors for their ongoing bullishness.

"We continue to believe upstream energy companies are favorably set-up in the current commodity upcycle (1) to generate double-digit free cash flow, which should allow for attractive capital returns and/or balance sheet improvement and thus allow for shares to outperform; (2) to undergo favorable consensus revisions in 2022 (we see 42% upside to consensus operating cash flows and 57% upside to EPS); and (3) given attractive valuation at our long-term Brent oil price of $90/bbl (vs. $80/bbl prior) despite our expectations for higher incremental inflation. Given the highly volatile commodity price environment, we continue to recommend a beta barbell strategy and prefer companies where we see dislocations on valuation relative to asset quality and where higher free cash flow from the current upcycle can drive greater capital returns relative to consensus expectations," explains Goldman Sachs' Neil Mehta.