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Exxon Mobil Corporation (XOM) Buy or Sell Stock Guide
Are you looking for the analysis of Exxon Mobil Corporation (XOM) stock? Are you wondering what the bulls and the bears say about it?
If so, you came to the right place. In this stock guide, we will share with you 10 reasons to buy and 9 reasons to sell XOM stock. You’ll get a perspective on what the bulls and the bears say about it.
The analysis below may be also helpful to you if you have any of the following questions about XOM stock:
- Is XOM a buy or a sell?
- Should I sell or hold XOM stock today?
- Is XOM a good buy / investment?
- What are XOM analyst opinions, recommendations and ratings?
Let’s start with the bull case. Here are the reasons to buy XOM stock:
1. Exxon will see its portfolio mix shift to liquids pricing as gas volumes decline and new oil and liquefied natural gas projects start production. Cash margins should improve as a result.
2. While Exxon will struggle to improve returns materially, it should deliver free cash flow growth to support dividend increases and, eventually, repurchases.
3. With coordination between upstream and downstream operations, as well as integrated refining and chemical facilities, Exxon achieves a high level of integration that creates value, as opposed to simply owning the assets, as peers do.
4. ExxonMobil is the world’s best run integrated oil company based on its track record of high return on capital employed. As the largest publicly traded oil company, ExxonMobil has long been a core holding for investors seeking defensive as well as continued dividend growth. With a stable cash position, the company’s balance sheet is one of the best in the industry.
5. ExxonMobil has merged its refining & marketing businesses. The merger will help the company take better decisions and boost performance. The development will help ExxonMobil generate more cashflow from downstream activities, countering the volatility in its upstream business.
6. ExxonMobil recently discovered oil from the Ranger-1 exploration well, located off the coast of Guyana. It made six oil discoveries in the region since 2015. The company estimated recoverable resources from the prior five discoveries at 3.2 billion barrels of oil equivalent.
7. ExxonMobil announced its intention to boost production from Permian Basin in West Texas and New Mexico. The company is willing to produce more than 600,000 barrels of oil equivalent per day within 2025 from the basin. It is to be noted that over the long term, ExxonMobil is expected to allocate as much as $2 billion for developing midstream infrastructure related to transportation activities.
8. XOM profitability is improving. The YoY profit margin change was 4.66 percentage points. See XOM profitability chart.
9. XOM forward dividend yield is 5.15%, higher than the industry (0.57%) and sector (0.20%) forward dividend yields. See XOM forward dividend chart.
10. XOM average analyst price target ($78.43) is above its current price ($68.80). See XOM price target chart.
Now that you understand the bull case, let’s look at the reasons to sell XOM stock (i.e., the bear case):
1. With rising resource nationalism, Exxon has found it increasingly difficult to increase production and book reserves. As a result, it's more reliant on higher-cost projects than in the past.
2. Returns are unlikely to ever reach historical levels without higher commodity prices, potentially resulting in compression of Exxon's premium multiple.
3. The expected decline in capital spending may prove only temporary, and Exxon may have to increase spending in several years to maintain production.
4. Despite substantial improvement in oil prices since February 2016, the commodity is still trading much below the level reached during mid-2014. Hence, the persistent weakness in commodity prices remains as overhang on the stock.
5. We are concerned about the integrated energy player’s rising exploration expenses. During fourth-quarter 2017, the company’s exploration cost surged more than 106%. If the trend continues, ExxonMobil’s upstream business will likely be affected.
6. ExxonMobil has collaborated with Russia for exploring potential commercial reserves in the country. However, tensions between the U.S. and Russia might lead the U.S. Government to impose sanctions on Russia. Thus, Exxon’s efforts to generate shareholders’ cashflow by exploiting Russian oil and gas reserves might not pay off.
7. XOM quarterly revenue growth was -5.50%, lower than the industry and sector average revenue growth (6.07% and 3.42%, respectively). See XOM revenue growth chart.
8. XOM forward P/E ratio is 17.62, and it’s high compared to its industry peers’ P/E ratios. See XOM forward P/E ratio chart.
9. XOM short interest (days to cover the shorts) ratio is 3.71. The stock garners more short interest than the average industry, sector or S&P 500 stock. See XOM short interest ratio chart.
Now let's look at the key statistics for XOM:
|Average Price Target / Upside||$78.43 / 13.56%|
|Average Analyst Rating||Hold|
|Industry||Oil & Gas Integrated|
|Number of Employees||71,000|
|Forward P/E Ratio||17.84|
|YoY Quarterly Revenue Growth||-14.5%|
What are your thoughts on XOM?
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