Oil prices, which slumped during the warm winter, are climbing back to last summer’s highs, with West Texas Intermediate crude prices above $85 a barrel – and potentially rising further as conflict continues to grip the Middle East shake. How best to take advantage of this trend of rising oil prices?
Don’t think about it too much. Sometimes the obvious answer is the right one: buy ExxonMobil (NYSE:XOM) Camp, pushing UBS Analyst Josh Silverstein because this stock is going to $150 in a hurry.
Is ExxonMobil stock a buy?
In a note published Thursday on TheFly.com, Silverstein argued that Exxon’s comprehensive coverage of all upstream and downstream oil operations puts it in a good position to benefit from rising oil prices and the company’s recent $60 billion acquisition deal Natural Resources Pioneer will contribute to this strength.
Maybe he’s right. Oil is a notoriously volatile commodity (over the last five years we have seen prices fluctuate). Negative Oil prices rose during the pandemic to as high as $120 a barrel in the immediate aftermath of Russia’s invasion of Ukraine. Still, the long-term price trend shows an upward trend, up about 33% over the past five years, and Exxon has benefited from rising prices, for example, earning more than $36 billion on revenue of $338.3 billion last year. earned dollars.
Still, I’m no longer as optimistic about Exxon today as I was a few years ago. Why not? After a brief divergence, Exxon has resumed its long-term trend of generating weaker free cash flow than it reports as net income – and even its net income doesn’t translate into a particularly cheap stock price. At nearly 14 times earnings and expected earnings growth of less than 10% in total Over the next three years, Exxon won’t be a major growth stock. While the business remains strong and the 3.1% dividend yield is decent, it won’t be enough to attract investors who can easily earn 4% or even 5% in a bank savings account today.
Silverstein’s prediction of a stock price rise of nearly 25% in a year seems like wishful thinking to me.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool recommends Pioneer Natural Resources. The Motley Fool has a disclosure policy.
ExxonMobil shares are up 24%, according to 1 Wall Street analyst originally reported by The Motley Fool