Jefferies analysts named three beneficiaries of the decline in oil prices

Jefferies considers that the continued decline in oil prices could provide strong support for the shares of a number of technology and consumer companies. Low prices will hit players in the energy sector, but representatives of some other sectors may gain significantly, the bank's analysts wrote;

Among the companies that could benefit from cheap oil, Jefferies highlighted graphics processor makerAdvanced Micro Devices (AMD) and raised its target price from $100 to $160, with the stock already up 30% since the start of the year. HSBC on July 10 also revised its target, raising it immediately to $200, and upgraded its rating on the chipmaker from "hold" to "buy" with a $200 target price. HSBC analyst Frank Lee noted the company's low valuation and earnings growth due to the launch of the MI400 series of chips in fiscal 2026, as well as strengthening demand in the AI segment.

According to Jefferies, shares of cloud services provider Datadog are no less attractive if oil prices continue to fall. With values up just 1% since the beginning of the year, the company could accelerate its momentum, analysts predict. Wolfe Research upgraded their rating from "neutral" to "above market" after meeting with Datadog executives in New York, emphasizing the magnitude of the AI-related announcements. Wolfe analysts called the company "not just a resurgent hunter, but a participant in the technological feast." The target price for Datalog stock, they estimate, is $150.

Jefferies also focused on Zscaler, known for its cybersecurity solutions. Over 2025, its shares have risen by 60%, and Wells Fargo in June raised their rating from "neutral" to "above market" and sharply increased the target - from $260 to $385, which suggests the potential for growth by a third compared to current quotes. Analysts cite strong new solution sales as a key driver, and expect subscription growth of more than 20% in fiscal 2026.

Historically, periods of significant oil price corrections have coincided with periods of earnings growth and good quote performance in non-obvious industries such as the technology sector and non-essential consumer goods. "Looking at the broader market context, near-term weakness in oil prices - and possible stabilization at current levels - could be a tailwind for U.S. equities," Jefferies analysts said.

According to a study by the ECB, high oil prices have a dampening effect on stock markets, while falling prices favor growth. On the one hand, expensive fuel lowers economic growth forecasts and raises inflation expectations, leading to a reduction in expected corporate profits as costs squeeze margins. On the other hand, high price volatility raises the risk premium on equities, and lower real long-term interest rates, while having a supportive effect, typically do not offset the above factors. The largest declines in returns at high prices are seen in the consumer staples, technology and telecom sectors, reflecting their high sensitivity to oil prices, the study said.

Since the beginning of the year, WTI crude futures have fallen from around $80 per barrel to just over $66 - the decline was driven by the escalation of the global trade war and the introduction of new duties by Donald Trump's administration, as well as the decision of OPEC+ countries to lift some of the restrictions on production. According to Jefferies, these factors will not lose relevance in the near future, and prices are likely to remain at low levels.

This article was AI-translated and verified by a human editor