What's Next for Phillips 66 Stock After a Big Purchase?

PSX announced an agreement with NOVONIX on August 9

Aug 12, 2021 at 12:08 PM
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On Aug. 9, energy company Phillips 66 (NYSE:PSX)  announced that it has entered into an agreement to acquire a 16% stake in NOVONIX Limited, an Australian-based company that develops and supplies materials for lithium-ion batteries.

After the deal was announced, Phillips 66 stock shed 1.3% on the day. Longer term, PSX is up 5.4% year-to-date, but has shed xx% off its June 10 annual high. Despite the year-to-date breakeven battle, 8 of the 11 in coverage maintain a "buy" or better rating, with zero "sells" on the books. Moreover, Phillips 66 offers a forward dividend of $3.60 and a dividend yield 4.85%.

Overall, Phillips 66 stock has strong potential as a recovery play from a fundamental perspective, and offers a decent level of security as a long-term dividend investment especially given PSX's large market cap of $32.6 billion. Since reporting fiscal 2020 financial results, Phillips 66 has grown revenues by 26% and has increased net income by about $2.3 billion. However, PSX's revenues have decreased by 27% and its net income is still down by $7.3 billion since fiscal 2018. Nonetheless, Phillips 66 is expected to return to profitability in the next quarter, with analysts placing forward price-earnings ratio of 40.82 on PSX.

PSX calls can be had for a relative bargain right now. This is per the security’s Schaeffer’s Volatility Index (SVI) of 33%, which stands higher than just 13% of readings from the past year, suggesting options traders are pricing in low volatility expectations at the moment. Even better, the stock’s Schaeffer’s Volatility Scorecard (SVS) ranks at 88 out of a possible 100. This implies the equity has exceeded these volatility expectations – a boon for buyers.

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