Warren Buffett’s Berkshire Hathaway (NYSE: BRK.A) ended last year with a buying spree of the then-underperforming Occidental Petroleum (NYSE: OXY), characterized by the stock consistently trading below the $50 mark.
Despite this performance, Buffett leveraged his enormous cash reserves, spending about $405 million on OXY shares through a series of transactions that accelerated towards the end of 2024. Now, the stock is showing signs of recovery, attempting to maintain its price above the $50 support zone.
Specifically, at the close of the last trading session, OXY was valued at $50.51, ending the day up 1.41%. On a weekly basis, the energy equity has rallied by about 4.6%.
Picks for you
Is OXY stock set for a breakout?
The stock’s technical setup and several fundamentals suggest the possibility of a breakout. For instance, an analysis shared by charting platform TrendSpider in an X post on January 5 indicated that OXY’s share price is forming a bullish technical pattern.
The stock is pushing above a descending wedge pattern, signaling a potential breakout. The weekly candlestick chart highlights significant buying activity and a bullish moving average convergence divergence (MACD) cross, reinforcing positive momentum.
With OXY currently valued at $50.51, the analysis pointed to key resistance levels to watch: $55 and $62.50. A decisive break above these levels could pave the way for further upside, potentially testing higher price ranges not seen since early 2024.
Although Buffett’s confidence is a key catalyst for growth, Occidental Petroleum is supported by other strong fundamentals, particularly from a financial perspective, which could attract more investor interest.
The company has made a remarkable financial recovery, reducing its debt by 60% since its 2019 acquisition of Anadarko Petroleum. In this line, Buffett’s confidence in Occidental can also be attributed to the firm’s strategic use of $23.6 billion in free cash flow from the 2022 oil surge. This enabled Occidental to pay down debt, lower interest costs, and redeem 15% of Berkshire’s preferred stock, saving $120 million annually.
In addition to its oil operations, Occidental’s investment in direct air capture (DAC) technology positions it for long-term growth. Notable developments include Microsoft (NASDAQ: MSFT) purchasing 500,000 metric tons of carbon credits and the U.S. government investing $500 million in Occidental’s carbon capture projects. These efforts tap into a potential multi-trillion-dollar market.
Occidental Petroleum revenue outlook
Meanwhile, Occidental faces a mixed revenue outlook. A decline is expected in 2024, followed by a modest recovery in 2025. Analysts project revenue of $7.03 billion for the last quarter of 2024, reflecting a 6.65% drop from last year’s $7.53 billion. However, the next quarter is expected to see a 14.96% increase, reaching $6.91 billion compared to $6.01 billion a year ago.
For the full year 2024, OXY’s revenue is estimated at $27.15 billion, down 6.1% from 2023. By 2025, the company is forecast to rebound with $28.44 billion in revenue, marking a 4.75% year-over-year growth.
A review of Wall Street analysts on TipRanks suggests that OXY will likely trade at an average price of $60.45 in the next 12 months, with the highest forecast at $78.
Featured image via Shutterstock
