How to invest in the US energy sector? Mizuho's top picks for these stocks
US oil and gas giant Chevron, pipeline operator Energy Transfer, solar technology company Nextracker, and utility company Edison International are Mizuho Americas' top picks in the energy sector, receiving an "outperform" rating. Mizuho has a target price of $205 for Chevron, $20 for Energy Transfer, $59 for Nextracker, and $85 for Edison International. The bank believes that Energy Transfer's impact on the data center/artificial intelligence theme is underestimated, Nextracker will benefit from the growth in solar demand, and Edison International is expected to achieve earnings per share growth
According to the Zhītōng Finance and Economics APP, a report from Mizuho Americas on Wednesday showed that American oil and gas giant Chevron (CVX.US), pipeline operator Energy Transfer (ET.US), solar technology company Nextracker (NXT.US), and utility company Edison International (EIX.US) are the bank's top picks in the energy sector, with an "outperforming the market" rating.
Mizuho has a target price of $205 for Chevron, estimating the oil giant's 2025 EV/EBITDA valuation at 4.8 times, compared to around 5.0 times for international oil companies. The 2025 FCF/EV ratio is 9.2%, with a discount of about 6.8% compared to peers.
Chevron remains one of Mizuho's top stock picks, with a target price expected to be 10% or more above market expectations.
For Energy Transfer, the bank has a target price of $20 and believes the company has growth opportunities.
Mizuho added that the improvement in Energy Transfer's leverage outlook should result in a capital return rate exceeding the current 3-5% distribution growth rate. Analyst Gabriel Moreen stated that the bank believes Wall Street underestimates Energy Transfer's impact on the data center/artificial intelligence theme.
Nextracker has a target price of $59 from Mizuho, with the bank stating that the company will benefit from the growth in solar demand to support the growth of data center/artificial intelligence workloads. "Demand will translate into order growth in 2025, with revenue recognition expected as early as the end of 2026 or later."
Finally, Edison International has a target price of $85 from the bank, with expectations of achieving 5-7% earnings per share growth. Mizuho emphasized that the company's "strong capital expenditure plans in the coming years and a supportive regulatory environment are key drivers," which could help improve profits.
Analyst Anthony Crowdell noted, "As investors seek utility companies with robust capital plans and supportive regulation, we turn our attention to California and view Edison International as the best investment."