Halliburton: Oil Without Risk

On a year-over year basis, Halliburton is guiding analysts to 50% EPS growth annually through at least next year. By 2023, Halliburton is expected to approach its pre-COVID-19 earnings high of $1.90/share, implying a forward P/E ratio of 11.4x — well below its pre-COVID-19 average of 22x.

I like owning HAL at the $20-23 range, which coincides with the 50-day moving average and the lower range of a clear upward channel (chart below).

channel

My target of $38 comes from multiplying 2023 consensus estimates of $1.80 by a P/E multiple of 22x (Halliburton’s median valuation pre-COVID-19 in 2018-19), discounted to the present at 2% ($1.80 x 22) * 0.97 = $38.

Current skepticism could become a catalyst for the stock in coming months. As analysts raise estimates and targets, institutional investors will buy. This may take a while, but I believe HAL will trade appreciably higher as oil demand returns and Wall Street plays catch-up.

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