The price of Suncor Energy (NYSE: SU) stock has weakened from $21.4 to $11.11 in less than six months and the current price stands around $12. In my opinion, Suncor Energy is a stable company that pays a very good dividend.
Fundamental analysis: Suncor Energy is in Berkshire’s portfolio
Suncor Energy primarily focuses on developing petroleum resource basins in Canada’s Athabasca oil sands but the company also trades in crude oil, natural gas, byproducts, refined products, and power. According to the latest news, the company will cut 15% workforce over the next year amid oil weakness.
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This will be accomplished through a combination of voluntary buyouts, early retirements and layoffs. This stock is attractively valued currently and according to analysts, Suncor Energy is positioned to weather the COVID-related storms.
Suncor has a few competitive advantages when it comes to oil, the company is saying that, with oil at $35, it can still make money, pay a dividend, and wait for better times. Very important information for potential investors is the fact that Berkshire Hathaway increased its position in this company and added around 5,000 new shares in 2019.
Berkshire Hathaway has paid between $28-$33 per share which is much above the current price of the stock. The company increased its revenue in 2019 to $29.5B from $28.23B in 2018 and the growth projects will ensure that the numbers will be moving up in the future.
If we compare total stockholders’ equity of $26.89B and the market capitalization of $17.50B, we can notice that this stock is not overvalued and maybe now could be a good time to buy this stock. Suncor Energy has paid more than $5B dividends to its shareholders in the last three years and this number can be even bigger in the future.
There are some obvious risks when it comes to investing in Suncor Energy stock and there are several negative facts that are connected with this company. The negative fact is that Suncor Energy reported a larger than expected Q2 adjusted loss and a 58% Y/Y decrease in revenues.
The negative results were impacted by the COVID-19 pandemic but the business of this company is not compromised. Production guidance for 2020 has been revised downward and costs upward.
Suncor Energy reported that expects to achieve full mining rates of ~300,000 bbls/d by the middle of Q4. The company expects that total production in 2020 will be (boe/d): 680,000–710,000 and capital spending for full-year is expected between $3.6B and $4.0B.
The new investments will not be profitable if oil prices are not at a certain level which will depend on demand and competition.
Technical Analysis: $10 represents a very strong support level
When trading Suncor Energy, you should have in mind that the price could weaken even more in the upcoming weeks. On this chart, I marked important resistance and support levels.
The important support levels are $11 and $10, $14, $16 and $18 represent the resistance levels. If the price jumps above $14 it would be a signal to buy Suncor Energy stock and we have the open way to $16.
Rising above $18 supports the continuation of the bullish trend and the next price target could be located around $20. On the other side, if the price falls below $10 it would be a strong “sell” signal and we have the open way to $8.
Shares of Suncor Energy could be a very good investment option and most financial analysts are also expecting its price to rise considerably in the next several years. According to the latest news, the company will cut 15% workforce over the next year amid oil weakness. Despite this, the company is preparing for a safe and staged return to normal operations and the revenue will probably raise in the future.