Phillips 66 Shares Surge with Energy Stocks following Notable Options Flow
Phillips 66 (PSX) shares have climbed 27% in six weeks after we featured it in an Options Radar report after seeing notable bullish flow. PSX was also a name that screened for us fundamentally as a re-rate higher candidate in 2022 so this signal gave a near perfect entry. It also looks like the move is far from over though nearing a $95 level where a large January 2023 call block was written on 1/21. The reason we only focus on 2 or 3 of the hundreds of notable option trades each day is because we combine our ability to utilize technical and fundamental analysis to curate the best trades to follow. I also have some exciting plans in the future to integrate Hawk Database notable flows right onto a stock chart enabling easy buy and sell zones.
Here was the original 12/20 write-up:
Phillips 66 (PSX) saw late week bullish flow with 1250 May $65 puts sold to open for $575K premium and nearly 1200 January 2023 $87.50 calls bought to open for $450K premium. PSX does not have a lot of notable open interest and did see 1000 January $80 puts bought on 11/16 that are +70%. PSX has been in a choppy range most of the year and the last few weeks basing right above VWAP off the March 2020 lows and above $75 could start a nice move higher. PSX is a diverse Energy leader with four operating segments: Midstream, Chemicals, Refining and Marketing/Specialties. PSX has a market cap of $31.35B and trades 10.45X Earnings, 9.6X EBITDA, 1.75X Book and 20.75X FCF with a 5% dividend yield. Forecasts see PSX growing EBITDA another 36.8% in 2022 after 159.6% growth in 2021 as the energy markets rebounded. Analysts have an average target of $95 with short interest low at 2% of the float. Goldman recently put shares in its Conviction Buy List seeing it as a potential leader to laggard in 2022 seeing cheap valuation, a strong yield and capital discipline. Goldman has an $89 target noting the core refining business is being valued at 1X EBITDA versus peers at 3X-4X. Investors remain skeptical of PSX’s refining profitability given recent operational concerns and distillate weakness. JP Morgan upgraded to Overweight with a $93 target on 12-8 seeing the company turning the corner after a challenging year and expects the valuation gap to close as margins improve.
