According to Goldman Sachs, the setup for shares of Devon Energy is looking rosier despite the recent decline in performance. Analyst Neil Mehta upgraded the energy stock to buy from neutral, citing its attractive valuation and improving confidence in capital spending and the production outlook. “While we don’t expect DVN to beat our expectations and consensus production expectations, we believe the stock is trading at a discount to peers and potentially pricing in concerns about further missteps relative to other large-cap companies,” he wrote in a note on Tuesday. clients. Energy stocks have underperformed this year after a solid 2022 as oil prices fall from record highs. Devon Energy shares are down 19.7% this year. Shares added 1.7% before the bell With the Wall Street firm’s revised price target of $58, down from $63 a share on long-term lower oil prices. The target implies a 17% upside from Monday’s close. According to Mehta, the company’s recent underperformance beginning with its Q3 2022 results stemmed from higher capital expenditures resulting from a combination of increased material and service costs and lower production. DVN YTD mountain Devon Energy shares plunge nearly 20% “However, after relative underperformance compared to other large-cap companies, we believe valuations are increasingly compelling and we see the potential for well costs to decrease as a function of lower feedstock costs ( pipes, sand, among others) and slightly lower prices,” he said. Mehta also sees improving productivity trends and the potential for return on capital as likely contributors from here. It expects Devon to return 10% of its market capitalization through dividends and share buybacks, versus 8% among its large-cap peers. — CNBC’s Michael Bloom contributed reporting