Oil Stock Hits 10-Month High on Bull Note Flurry

MRO received no fewer than four price-target hikes today

Deputy Editor
Jan 14, 2021 at 10:27 AM
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The shares of Marathon Oil Corporation (NYSE:MRO) are up 8.6% at $8.76 at last check, after an upgrade from Truist Securities to "buy" from "hold," with an added price-target hike to $12 from $8. The firm cited company strategies that should result in a cash flow yield of nearly 20% this year. Three other analysts chimed in with price-target hikes as well -- Scotiabank and Citigroup to $9 and J.P. Morgan Securities to $10. 

Today's price action has MRO trading at 10-month highs. After bouncing off its 30-day moving average to end 2020, Marathon Oil stock has jumped to a 28.7% year-to-date lead already. While the shares have nearly tripled off their April 1 record bottom near $3, longer term, MRO has some work to do with its 35% 12-month deficit. 

There is plenty of room for further upgrades/raised price targets, considering 11 of the 18 analysts in coverage sport a "hold" or worse rating on Marathon Oil stock. Plus, the 12-month consensus price target ahead of today's trading was $8.22 -- a 5% discount to current levels. 

Meanwhile, today's positive price action has options bulls taking notice. Call volume is double what's typically seen at this point, with 14,000 calls across the tape so far. The January 8 call, which expires tomorrow, is seeing the most activity. 

Now could be a good time to weigh in on these options, per MRO's Schaeffer's Volatility Index (SVI) of 69%, which sits in the 18th percentile of its annual range. This means the stock is seeing attractively priced premiums at the moment. Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a high 90 out of 100, meaning MRO has exceeded option traders' volatility expectations during the past year.


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