Argus Initiates Baker Hughes At Buy, Sees 32% Upside From Here

The new Baker Hughes, a GE company Class A BHGE is off to a bumpy start. The company, a union between oil services giant Baker Hughes and the oil & gas division of General Electric Company GE, has struggled since it began trading under its new ticker earlier this summer.

However, on Monday, Argus analyst Bill Selesky initiated coverage of the new Baker Hughes with a Buy rating and $43 price target and said the company is well-positioned to give rivals Halliburton Company HAL and Schlumberger Limited. SLB a run for their money.

According to Selesky, the true power in the marriage between Baker Hughes, which holds a 37.5 percent stake in the new company, and General Electric, which holds a 62.5 percent stake, is GE’s digital technology.

“We expect GE’s strength in digital technology to complement Baker Hughes’ traditional energy services and equipment offerings,” Selesky wrote (see his track record here).

Related Link: A Batch Of Bullish Calls Just Initiated On Oil And Gas Stocks

Argus’ $47 price target represents 20.3 times the firm’s 2018 earnings estimates for the company. Of course, Selesky noted that Baker Hughes’ fate will continue to be tied to the struggling crude oil market.

Argus has a Market-Weight rating on the energy sector and is projecting a modest rebound in oil prices in the coming years. The firm is calling for $52/bbl WTI crude oil prices in 2017 and wars investors that the rebalancing process will likely continue to be volatile. In the next year, Selesky said oil investors should expect the commodity to trade between $42 and $60/bbl.

Disclosure: The author is long HAL, BHGE and SLB.