Integrated oil and gas giant Cenovus Energy (CVE) (TSE:CVE) ordinarily would face questions about its future relevance. However, Republican presidential candidate Donald Trump’s promised campaign goal to roll back the Biden administration’s green infrastructure policies – which include EVs – could be a golden ticket for the energy firm. Essentially, if Trump wins the election (which is very possible), demand for combustion-based vehicles could rise, benefiting oil companies. Therefore, I am bullish on CVE stock.
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Trump’s No-Nonsense Policy May Help CVE Stock
Love him or hate him, the former president and reality television star generally leaves no ambiguity about his positions. That includes some of his most contentious remarks. Regarding CVE stock and the broader hydrocarbon energy sector, Trump clearly stated that he would take aim at President Joe Biden’s EV policies. In fact, he vowed to end what he termed the EV “mandate” on his first day in office.
So sharp is Trump’s rhetoric that it has caused alarm among automotive companies and manufacturers of EV batteries. At issue is the future of the Inflation Reduction Act. Passed in the summer of 2022 without any Republican backing, the IRA represented one of the mainline catalysts for clean energy investments that sprouted across the U.S.
However, Trump has publicly criticized the initiative, stating that the underlying EV policy would “spell the death of the U.S. auto industry.” Further, the Republican candidate declared that his administration would look to cut spending earmarked for the IRA’s tax credits. Such a move would have significant implications for related programs involving major foreign corporations.
Still, a brash administration that supports fossil fuels would be exactly what stakeholders of CVE stock would appreciate. Based in Canada, Cenovus features a refining business unit located in the U.S. This segment produces gasoline, diesel, jet fuel, asphalt, and other products – products that should receive a positive spotlight if Trump wins his non-consecutive re-election bid.
Now, to be fair, concerns exist that Vice President Kamala Harris – who will now run at the top of the Democrats’ ticket – is closing the gap on “The Donald.” Harris has enjoyed a groundswell of support, being younger and more energetic than President Biden.
Still, it likely can’t be avoided that the Democrats’ position is messy. Biden was the frontrunner until a terrible debate performance sparked infighting and serious criticisms about his physical capacity to handle another term. On the other hand, Trump has always been the favorite among the conservative electorate.
Such continuity of support cannot be easily dismissed. That’s not great news for Democrats, but it’s a godsend for CVE stock.
Financial Projections Make Logical Sense
On a financial note, Cenovus could enjoy a double benefit. First, Trump’s attack on Biden’s EV policies would erode competition; people may be less interested in making the switch to electric-powered transportation. Second, his overtures toward the fossil fuel industry may keep the lights on for longer than expected.
With that, investors may have a greater degree of confidence in analysts’ projections for Cenovus. For example, the consensus view for sales in Fiscal 2024 comes in at $41.08 billion. If so, that would represent a 7.7% lift from the prior year’s tally of $38.16 billion. Further, the high-side estimate calls for $42.88 billion.
Moreover, Fiscal 2025 projections may require an adjustment higher if Trump pulls off a White House victory. At the moment, the consensus view calls for revenue of $40.73 billion. However, it’s quite possible that the most optimistic forecast – calling for sales of $43.96 billion – will pan out. That’s because Trump’s pro-fossil-fuel policies should boost production.
In addition, based on prior rhetoric, one would imagine closer ties between U.S. and Canadian oil and gas enterprises. This could lead to synergies that help lift CVE stock.
Now, what’s really attractive about Cenovus is the valuation. Right now, CVE stock trades at 0.78x trailing-year revenue. In the past year (from the third quarter of 2023 to Q2 2024), this metric averaged 0.88x. Therefore, it’s conceivable that CVE could reach its prior valuation.
Even more enticing, the oil and gas integrated energy industry features an average price-to-sales ratio of 1.13x. So, CVE stock is already undervalued as it is. Bring in a second Trump administration, and Cenovus improves its odds of hitting (or perhaps even exceeding) its most bullish targets.
That would make the oil giant an even more compelling opportunity.
Is CVE Stock a Buy, According to Analysts?
Turning to Wall Street, CVE stock has a Strong Buy consensus rating based on eight Buys, zero Holds, and no Sell ratings. The average Cenovus Energy stock price target is $24.83, implying 37.9% upside potential.
The Takeaway: A Trump Win Is Exactly What CVE Stock Needs
On the surface, integrated oil giant Cenovus Energy would appear to be facing a battle with relevance. However, Donald Trump’s push for a second term could be what CVE stock needs. Thanks to the former president’s aggressive anti-EV stance along with his pro-fossil-fuel policies, the hydrocarbon enterprise could benefit from a demand spike.
