Suncor (TSX:SU) Stock: Buy Now or Wait?

Suncor (TSX:SU) stock appears cheap today. Is this the right time to buy?

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Suncor Energy (TSX:SU)(NYSE:SU) and its peers continue to trade at depressed prices. This has contrarian investors wondering if energy stocks might be attractive bets right now.

Let’s take a look at the current situation to see if Suncor deserves to be on your buy list.

Oil market

West Texas Intermediate (WTI) oil currently trades near US$42 per barrel. The price rebounded steadily over the past few months after the futures market briefly went negative in April.

What happened?

COVID-19 lockdowns across the globe hammered fuel demand from airlines, commuters, and commercial vehicle operators. Refineries reduced fuel production, leading to a severe drop in demand for crude oil. Producers initially kept pumping, but the market started to worry that global storage sites might reach capacity.

Investors holding futures contracts for May and June deliveries panicked, as they worried that they might be forced to take delivery of oil that would have no place to go.

Ultimately, the market sorted things out. Enough storage remained available and some savvy traders made a bundle on the rebound.

Upside opportunity

The massive investment cuts announced by global oil producers this spring could result in a supply pinch in the next few years. Oil demand remains weak, but it is improving as governments reopen their economies. Volatility is expected in the near term due to new COVID-19 waves and outbreaks. However, once vaccines and effective treatments are widely available, the global economic engine should roar back into overdrive.

Fuel demand could actually top previous levels as commuters decide to drive instead of taking public transportation.

Airlines expect the recovery in travel demand to take three or four years. It is too early to tell whether that’s a cautious or optimistic outlook. Nonetheless, air travel should eventually rebound, as it did after previous crashes.

Should you buy Suncor stock now?

Suncor trades close to $21 per share at the time of writing. The stock dipped as low as $15 in March and topped $28 in June. In January, when WTI sat above US$65 per barrel, Suncor traded for more than $44 per share, so there is decent upside potential on a rebound.

Suncor cut its dividend by more than 50% to preserve cash flow during the pandemic. The new payout offers a 4% yield right now.

Suncor’s WTI breakeven price sits around US$35 per barrel. Assuming oil prices continue to slowly drift higher, the stock price should rise on improved sentiment for producers. Suncor’s downstream operations traditionally provide a nice hedge against volatility in the oil market. Unfortunately, that wasn’t the case this time. The four large refineries and roughly 1,500 Petro-Canada service stations also saw revenue plunge in recent months.

With rebounding economic activity, the refining and retail businesses should see improved results. Suncor’s current share price might not fully reflect the recovery potential.

Risks certainly remain for the energy producers. New lockdowns and an extended delay in economic growth could put additional pressure on Suncor’s stock price in the coming months. The long-term outlook is also a question mark as electric vehicles become more common and governments push stimulus investments towards renewable energy solutions.

That said, Suncor appears cheap right now. Investors who buy today can pick up a decent yield and it wouldn’t be a surprise to see the share price at $40 again within the next five years, especially if the oil market gets tight due to a lack of capital investment.

Should you invest $1,000 in Brookfield Renewable Partners right now?

Before you buy stock in Brookfield Renewable Partners, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Brookfield Renewable Partners wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $21,058.57!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 38 percentage points since 2013*.

See the Top Stocks * Returns as of 2/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Walker has no position in any stock mentioned.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Energy Stocks

Electricity transmission towers with orange glowing wires against night sky
Energy Stocks

Where Will Fortis Stock Be in 5 Years?

Where Fortis stock will be in 2030 depends on how the market is performing at the time, but it certainly…

Read more »

Young Boy with Jet Pack Dreams of Flying
Dividend Stocks

Here’s How Many Shares of Peyto You Should Own to Get $100 in Monthly Dividends

Peyto Exploration and Development stock offers investors monthly income and exposure to the strong natural gas market.

Read more »

oil pump jack under night sky
Energy Stocks

Buy the Dip Now: This Canadian Energy Stock Won’t Stay Cheap for Long

This energy stock won't be down for long, leaving less time for investors to get in on a great deal.

Read more »

Oil industry worker works in oilfield
Energy Stocks

Better Energy Stock: Suncor vs Canadian Natural Resources?

TSX energy stocks such as Suncor and CNQ have created massive wealth for long-term shareholders. But which is a good…

Read more »

A person looks at data on a screen
Energy Stocks

Enbridge Stock vs. Cameco: Which One Is a Better Buy on the Dip?

Consider Enbridge (TSX:ENB) and another great momentum play to energize your TFSA.

Read more »

man touches brain to show a good idea
Energy Stocks

Trump Tariffs: Are Canadian Energy Stocks Still a Safe Haven for Investors?

Amid Trump’s tariffs, can Canadian energy stocks still shelter your portfolio? Let's identify the risks and opportunities.

Read more »

grow money, wealth build
Energy Stocks

Down 30% From Highs: Is This TSX Growth Stock a Screaming Buy?

This TSX stock may be down now, but don't count it out. With plenty of growth opportunities already underway, now…

Read more »

A worker overlooks an oil refinery plant.
Energy Stocks

Dividend Investors: Top Canadian Energy Stocks for March

These two energy stocks have increased payouts and have strong outlooks, making them potentially ideal picks for dividend investors.

Read more »