Shares in Suncor Energy Corp. fell almost 6% on Tuesday after the oilsands giant, struggling with its Petro-Canada merger, reported a big fourth quarter earnings miss.
Now down 11% in 2010, the stock is ripe for picking, says UBS analyst Andrew Potter.
"[The] pullback creates good opportunity to own [Suncor] at a discounted valuation," he said in a note to clients.
Despite Suncor's guidance for weak production in 2010, Mr. Potter said oil sands volumes will ramp-up to 340,000 bbl/d by the end of the year. That will set the stage for big growth in 2011.
At the same time, he thinks high cash costs this year will be lower next year due to the higher volumes.
He maintained his Buy rating and cut his target price to $47 from $48 to $47.
"SU is now trading at less than 10x 2011E EPS – in-line with Global Integrateds notwithstanding its significantly higher growth and free cash potential," he wrote.