Rocketing to a price of $110.5 during today's afternoon trading session, shares of ConocoPhillips are still -16.36% below their average target price of $132.12. Could there be more upside potential for the stock? Analysts are giving COP an average rating of buy and target prices ranging from $113.12 to $149.0 dollars per share.
The market seems to share this rosy outlook, since ConocoPhillips has a short interest of only 2.0%. This represents the percentage of the share float that is being shorted, and each short position stands for an investor's expectation that the price of the stock will go down in the future.
Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.
One way to get an idea of the market sentiment on a stock is to check its rate of institutional ownership. In the case of ConocoPhillips, institutional investors own 83.6% of the shares. This would indicate a positive sentiment towards the stock among institutions. What does this really tell us?
Institutional investors such as hedge funds, investment firms, and wealth managers devote significant resources to identifying good investments. If they have decided to invest in COP, it probably means they believe it is a solid investment choice. But it could also mean they are buying up shares in an effort to acquire the company or get seats on the board of directors. Also bear in mind that institutions are fallible (just maybe not quite as fallible as the average retail investor), so they may simply be wrong when they think they've found a good stock.
Overall, there is mixed market sentiment on ConocoPhillips because its an analyst consensus of some upside potential, a buy rating, an average amount of shares sold short, and a significant number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.
Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are COP's recent cash flows:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | 19,965,000 | 11,248,000 | 8,717,000 | -51.99 |
| 2022 | 28,314,000 | 10,159,000 | 18,155,000 | 55.54 |
| 2021 | 16,996,000 | 5,324,000 | 11,672,000 | 13316.09 |
| 2020 | 4,802,000 | 4,715,000 | 87,000 | -98.05 |
| 2019 | 11,104,000 | 6,636,000 | 4,468,000 | -27.75 |
| 2018 | 12,934,000 | 6,750,000 | 6,184,000 |
