Why Delek Holdings Stock Popped on Monday
Key Points
He now feels it's a buy.
He also upped his price target by 16%.
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Generally speaking, the U.S. stock market was frothy as the trading week kicked off. As ever, though, some titles were frothier than others; this certainly applied to Delek US Holdings (NYSE: DK), which saw its equity zoom almost 8% higher on a very bullish analyst change.
An exceptional exemption
The prognosticator behind the move was TD Cowen's Jason Gabelman, who upgraded his recommendation on Delek to buy from hold. He also raised his price target to $58 per share from $50.
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According to reports, Gabelman believes that investors have fully priced in Delek's refining operations. However, they are overlooking the company's small refinery exemptions, which exempt it from producing a certain percentage of renewable fuels (or from purchasing compliance credits in lieu of this requirement).
Additionally, the analyst waxed bullish about Delek's refining dynamics and its shrinking interest expenses. The latter in particular should positively affect the company's bottom line.
The war premium
I'd agree with Gabelman's assessment of Delek's under-the-radar advantage with the small refinery exemptions. I would also be bullish on the oil company's rather advantageous position as the Iran war drags on (although the latest news about potentially settling it is a development to be guarded about). I feel that this change in the recommendation is justified.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Delek Us. The Motley Fool has a disclosure policy.
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