Goldman Sachs Upgrades Exxon Mobil On Improving Oil Demand Outlook, Valuation

Exxon Mobil Corporation XOM is poised to benefit as oil demand recovers to pre-COVID-19 levels in the coming years, and the risks are already priced into the stock, according to Goldman Sachs.

The Exxon Mobil Analyst: Neil Mehta upgraded Exxon Mobil from Neutral to Buy and raised the price target from $42 to $52.

The Exxon Mobil Thesis: The company’s capital spending outlook has been meaningfully reduced from $30-$35 billion to $17-$19 billion in 2021 and $20-$25 billion from 2022 through 2025, Mehta said in the upgrade note.

“Relative to peers focusing on harvesting FCF generation, XOM has been more focused on growth investments across its Upstream, Refining and Chemicals businesses,” the analyst said. 

Goldman sees “value in the company’s growth assets, including in Guyana and Chemicals,” and its variable dividend strategy “has potential to be well-received by the market,” he said. 

Following years of underperformance, Exxon Mobil’s stock now has a “more attractive valuation,” Mehta said. 

XOM Price Action: Shares of Exxon Mobil were up 0.7% at $43.34 at last check Wednesday.