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Chevron to rally 16%, says Piper Jaffray

A floorhand operates a Chevron oil drilling rig near Taft, California.
Chip Chipman | Bloomberg | Getty Images

Investors should buy Chevron shares as a top pick in the energy space because of the company's ability to absorb oil losses and still pay a dividend, according to Piper Jaffray, which upgraded its rating on the oil giant to overweight from neutral.

"We believe CVX is an attractive name at this point of the cycle ... we believe CVX offers impressive financial resilience and dividend sustainability alongside leading operational leverage to eventual oil price normalization and a seemingly more sustainable business model than peers," said Piper Jaffray's Guy Baber in a Monday note to clients.

Baber raised Chevron's price target to $117 from $110, which represents near 16 percent upside from Monday's close. The firm trades at 12.3 times the price-to-earnings multiple of major oil companies, a 6 percent premium, according to the note. Chevron has rallied more than 13 percent since the beginning of this year.