Raymond James has upgraded Devon Energy Corporation (DVN) to a "Strong Buy," citing what the firm sees as meaningful upside tied to free cash flow generation, strategic flexibility and potential to close a valuation gap with peer companies. The brokerage increased its price target to $72 per share from $62, which it notes implies more than 40% upside from the stock's current trading level of $51.26.
Analysts at Raymond James emphasized that Devon appears cheap versus large-cap industry peers on a 2027 enterprise-value-to-EBITDA basis. The firm pointed to an estimated 2027 EV/EBITDA multiple for Devon of roughly 4.4x, versus about 5.5x for comparable companies. That valuation discount, coupled with an expected 2027 free cash flow yield near 13% for Devon versus a peer average around 8%, underpins the brokerage's bullish stance.
Capital allocation is central to the thesis. Raymond James highlighted Devon's plan to repurchase in excess of $5 billion of shares, underwritten by its projected free cash flow. Management has also committed to returning as much as 70% of annual free cash flow to shareholders through a combination of dividends and repurchases.
The bank identified a range of levers management could use to unlock shareholder value. Among them are potential divestitures of non-core assets outside Devon's Delaware Basin footprint. The Anadarko and Appalachia assets were identified as likely candidates for sale due to what Raymond James described as strong market interest.
Strategic moves already completed are also central to the argument. Raymond James expects Devon's acquisition of Coterra Energy to bolster the company's competitive position, potentially positioning it among the largest U.S. exploration and production companies. The firm also noted operational momentum, with management anticipated to exceed $1 billion in merger-related synergies.
On the operational front, production for 2026 is projected at about 1.36 million barrels of oil equivalent per day, a level described as broadly in line with market expectations. Capital expenditures for the year are estimated at approximately $5 billion. Raymond James further cited Devon's aggressive use of artificial intelligence to drive efficiency improvements, saying this places the company ahead of many peers in execution.
Overall, the upgrade reflects a combination of valuation, expected cash returns and strategic optionality, according to Raymond James. The firm sees the combination of a below-peer multiple, higher free cash flow yield and sizeable buybacks as creating a strong risk-reward profile for shareholders, provided the company executes on its plans.