Shares of Chevron (NYSE:CVX) are up roughly 16% so far this year, driven largely by optimism around Venezuela and firmer oil prices rather than any meaningful shift in the company’s core fundamentals.
Against that backdrop, HSBC downgraded Chevron to Hold from Buy, arguing that the recent rally has already captured much of the company’s strengths and leaves little room for further gains. Chevron shares slipped about 1.3% in Monday’s premarket trading. HSBC lifted its price target to $180 from $169, but noted this still implies only around 2% upside from current levels.
Chevron’s fourth-quarter performance exceeded expectations, with adjusted earnings coming in about 6% above consensus forecasts. Upstream earnings reached $3.2 billion, supported by solid contributions from Kazakhstan, the Permian Basin and the Gulf of Mexico. Total production averaged 4.05 million barrels per day, roughly 2% ahead of estimates, while $3 billion in share buybacks came in at the top end of guidance.
Looking ahead, Chevron left its 2026 guidance unchanged from its investor day. The company continues to target capital spending of $18 billion to $19 billion and upstream production growth of 7% to 10%, despite an expected dip in volumes early next year tied to outages in Kazakhstan and U.S. onshore assets. Management also reaffirmed its goal of delivering $3 billion to $4 billion in structural cost savings by the end of 2026, with more than 60% expected to come from durable efficiency improvements.
Venezuela remains an area of interest, but HSBC said the earnings impact is likely to be limited. Chevron has indicated it could increase production in the country by about 50% over 18 to 24 months without raising net capital spending. However, HSBC estimates Venezuela currently contributes just 1% to 2% of group cash flow, meaning an incremental increase of around 120,000 barrels per day would be unlikely to materially shift earnings.
While the bank continues to view Chevron’s financial discipline and cash flow profile favorably, it said the valuation now appears fair. HSBC added that Chevron’s modest discount to Exxon Mobil on 2026 estimated EV-to-DACF multiples is warranted, and pointed out that Chevron’s projected 2026 distribution yield of 7.2% lags European peers such as BP, TotalEnergies and Shell.