BP (LON: BP) share price rallied by more than 2% on Wednesday after a bullish call from Barrons. The stock rose to a high of 486p, which was about 40% above the lowest level this year. It has jumped by over 156% from its lowest level in 2020, making it one of the best FTSE 100 stocks.
BP share price has been in a strong bullish trend in the past few months as investors cheer the performance of oil and gas. Still, the stock has underperformed the SPDR Energy ETF (XLE), which has rallied by about 60% this year.
BP stock has done well as its business has become significantly profitable. In a statement, the company said that its underlying replacement cost profit rose to $8.2 billion. This profit was slightly below the $8.5 billion it made in the previous quarter.
Its operating cash flow was $8.3 billion while its net debt reduced to $22 billion. The company’s capital expenditure for the quarter was $3.2 billion. As a result, it offered $2.5 billion in share buybacks and increased its dividend payouts gradually.
In a report published this week, Barrons said that it was optimistic about BP’s business and stock. It cited the company’s investments in clean energy. For one, BP has made significant investments in an industry that is expected to supply 60% of world’s energy in the next few years.
In October BP acquired Archaea, a company that provides bioenergy solutions for $3.3 billion. It hopes that the deal will see it boost its clean energy credentials and boost its income. The firm is also investing in bioenergy, convenience, EV charging, renewables, and hydrogen. Still, there are concerns about the long-term returns of these clean projects.
Further, BP is relatively undervalued. It fetches less than four times the expected 2022 earnings, making it cheaper than other energy companies. This undervaluation is mostly because of BP’s long history of underperformance.
The daily chart shows that the BP stock price has been in a strong bullish trend in the past few months. Most recently, the stock has formed a break and retest pattern by retesting the important support level at 470p. This was a notable level since it was the highest point in August and October.
BP remains above all moving averages while the Relative Strength Index (RSI) has moved slightly above the neutral point. Therefore, the shares will likely continue soaring as buyers target the YTD high of 505p.
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