Keep an Eye on Exxon Mobil (NYSE:XOM) For a Pullback Opportunity

By
Stjepan Kalinic
Published
January 13, 2022
NYSE:XOM
Source: Shutterstock

So far in 2022, Exxon Mobil Corporation's (NYSE: XOM) performance seems to mirror one from one year ago, where the stock rallied for months.

With the oil prices climbing back to the multi-year highs, we can expect more positive catalysts for the stock.

Check out our latest analysis for Exxon Mobil

Latest developments

The energy sector has done well recently, as the Omicron fears subsided. Exxon Mobil followed by setting a new 52-week high.

With this latest rally, the stock finally recovered all the losses from the 2020 Pandemic.

NYSE: XOM 5-Year Price Movement&January 13th, 2022

Truist Securities upgraded Exxon to Hold (from Sell), with a $65 price target. Their analyst Neal Dingmann reflected on the confidence in further dividend increases along with share repurchases.

As a boost to its Low Carbon Solution effort, Exxon is acquiring a 49.9% stake in Biojet AS – a Norwegian advanced biofuel company that works on converting wood-based waste into biofuel and biofuel components. Planned production by 2025 includes 5 facilities.

Since October, the company is still struggling to find common ground with the United Steelworkers union regarding the company's lockout at the Beaumont refinery. The refinery is a significant employer in Beaumont, providing 1 out of 7 jobs.

While European demand is driving the U.S natural gas exports to record highs, Exxon is looking to sell shale gas properties in Ohio's Appalachian Basin. The company is selling 61 wells, with an estimated worth of US$200M.

What is Exxon Mobil worth?

According to our valuation model, Exxon Mobil seems to be priced at around 11% below the intrinsic value, which means if you buy Exxon Mobil today, you'd be paying a reasonable price for it. And if you believe that the stock is worth $80.24, then there's not a huge upside to gain from mispricing. Remember that our discounted cash flow (DCF) model does not consider the possible cyclicality of an industry or a company's future capital requirements, so it does not give a complete picture of a company's potential performance.

Yet, there might be an opportunity to buy at a more attractive valuation in the future. This is because Exxon Mobil's beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company's shares will likely fall by more than the rest of the market, providing a prime buying opportunity.

Can we expect growth from Exxon Mobil?

earnings-and-revenue-growth
NYSE: XOM Earnings and Revenue Growth January 13th, 2022

Investors looking for growth in their portfolio may want to consider a company's prospects before buying its shares. Buying a great company with a robust outlook at a low price is always a good investment, so we should consider the company's future expectations. Exxon Mobil's revenue growth is expected to be in the teens in the upcoming years, indicating a solid future ahead. Unless expenses grow at the same level or higher, this top-line growth should lead to robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? XOM's optimistic future growth appears to have been factored into the current share price, with shares trading around their fair value. Furthermore, the sentiment looks to be improving with rating upgrades and other positive catalysts.

However, there are also other important factors which we haven't considered today, such as the track record of its management team. Have these factors changed since the last time you looked at the stock?

Are you a potential investor? If you've been keeping an eye on XOM, now may not be the most optimal time to buy, given the significant rally in the last few weeks. Although the positive outlook is encouraging for the company, its elevated beta means there might be opportunities to buy the stock on pullbacks - just like in 2021.

If you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For example, we've discovered 2 warning signs that you should run your eye over to get a better picture of Exxon Mobil.

If you are no longer interested in Exxon Mobil, you can use our free platform to see our list of over 50 other stocks with high growth potential.

Simply Wall St analyst Stjepan Kalinic and Simply Wall St have no position in any of the companies mentioned. This article is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Discounted cash flow calculation for every stock

Simply Wall St does a detailed discounted cash flow calculation every 6 hours for every stock on the market, so if you want to find the intrinsic value of any company just search here. It’s FREE.

Make Confident Investment Decisions

Simply Wall St's Editorial Team provides unbiased, factual reporting on global stocks using in-depth fundamental analysis.
Find out more about our editorial guidelines and team.