Energy Stocks Surge on Positive Vaccine News
But plenty of upside remains.
Energy stocks surged on Nov. 9 following Pfizer's announcement of favorable phase 3 data on its COVID-19 vaccine. The broader Morningstar U.S. Market Index was up 1% on the day, but the energy sector soared 14%. West Texas Intermediate oil prices were up about 8%. Despite the rally, the energy sector is still down around 45% year to date. We think the sell-off has been overdone, and as such, energy stocks continue to look undervalued overall. Our median covered energy stock trades at a 37% discount to our fair value estimate. Within energy, oilfield services look cheapest overall, trading at a median 52% discount to fair value. Exploration and production stocks trade at a median 45% discount to fair value.