Shares of integrated oil giant Exxon Mobil Corporation (NYSE:XOM) have grossly underperformed when compared to not only the broader market, but also when paired with several of its closest peers like BP plc (ADR)(NYSE:BP) and Chevron Corporation (NYSE:CVX). But now seems like a good time to bet on XOM stock.
Indeed, lingering concerns about global oil supplies continue to pressure oil prices, which last week dropped to two-week lows, causing a selloff in energy-related stocks.
XOM stock closed Wednesday at $83.02. Exxon stock has fallen 8% year-to-date and 5% over the past three months, trailing the 7% rise in the S&P 500 index. And if you’ve held Exxon stock over the past year, you’ve gained just 0.5%, while the Energy Select Sector SPDR (ETF) (NYSEARCA:XLE) has risen 18%.
What’s Going on With Exxon Stock?
All told, XOM stock has not reflected the fundamental operational improvements the company has shown. To date, Exxon stock has only five Buy recommendations among the 25 Wall Street analysts tracking the company, according to Thomson Reuters data. Analysts aren’t excited about Exxon’s prospects and its ability to replenish energy reserves that would be necessary to make money in the future.
Headquartered in Texas, Exxon Mobil is the most oil-weighted energy company among its peers. But with production cuts currently being implemented by the Organization of the Petroleum Exporting Countries (OPEC) and Russia, XOM stock, which pays 3.6% annual yield, has become arguably the best bargain in energy.
On Wednesday, at the company’s annual analyst day in New York, Exxon highlighted to investors both short- and long-term projects the company says will help not only deliver revenue growth, but also sustain its dividend.
“Our job is to compete and succeed in any market,” new Chief Executive Officer Darren Woods said. This was Woods’ first time meeting with analysts since long-time CEO Rex Tillerson left in January to become U.S. Secretary of State in Donald Trump’s administration.
Woods discussed projects in North Dakota and Texas. The CEO also highlighted long-term projects in areas such as Russia, Qatar, the United Arab Emirates and Angola, which will all begin this year. When combined, these projects are expected to boost Exxon’s production in a range of 4 million and 4.4 million barrels of oil equivalent per day in the next three years. This compares to 4.1 million barrels per day in 2016.
Bottom Line for XOM Stock
It remains to be seen if Woods’ presentation will appease investors. But while the market may choose to remain skeptical on Exxon stock, opportunistic investors should buy in now. With plans to reduce the cost structure combined with initiatives to maximize the value of assets, XOM stock can reach $100 in the next 12 to 18 months, delivering 20% returns.
As of this writing, Richard Saintvilus did not hold a position in any of the aforementioned securities.
