ExxonMobil Stock Price Up 52% – Time to Buy XOM Stock?

ExxonMobil (XOM) stock is up 52% year-to-date and is outperforming the markets by a wide margin. What’s the forecast for XOM stock and is it a good buy stocks in July 2021?

The rally in ExxonMobil is being driven by the steep rise in energy prices. Crude oil prices are trading near six-year highs amid strong supply-demand dynamics. The global energy markets have come a full circle since 2020 when WTI prices had briefly turned negative. From a global glut of crude oil, we now find ourselves in a position where there are not enough barrels of oil to satiate the burgeoning demand for crude oil.

Outlook for crude oil prices

The fortunes of energy companies like ExxonMobil are closely interwound with crude oil prices. Crude oil prices have been on an uptrend and look bullish on the charts. WTI prices are trading above their 50-day, 100-day, and 200-day SMA (simple moving average) which is a bullish technical indicator. However, WTI is looking overbought with a 14-day RSI of 74.5.

From a fundamental perspective, the demand-supply dynamics for crude oil look very strong. The OPEC+ hasn’t yet decided on the production volumes and even if the block decides to add more barrels it would take a guarded approach and not flood the market.

Bank of America sees better days ahead for crude oil and expects them to hit $100 per barrel next year. Mining giant Glencore and Goldman Sachs also see crude oil at $100 as a real possibility.

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Crude oil prices could reach $100 per barrel

According to Bank of America strategist Francisco Blanch “There is plenty of pent-up oil demand ready to be unleashed.” Notably, crude oil demand has picked up in 2021 while supply growth has been tepid as the OPOC+ has been quite disciplined with adding more elections. After the Iran elections, the deal between the US and the Islamic Republic now looks tougher which takes away the risk of Iranian crude oil exports.

Joining the chorus of crude oil hitting $100 per barrel is former US Energy Secretary Dan Brouillette. He said, “You could very easily see oil hitting $100 a barrel, potentially even higher.” However, he also warned, “If there isn’t any agreement on production, and countries tend to go off and do their own thing, or do their own production, you could have a collapse of oil prices.”

ExxonMobil stock could surge

If crude oil prices were to indeed hit $100 per barrel, we could see a sharp rally in ExxonMobil stock. The stock is looking in a technical uptrend and is trading above the 50-day, 100-day, and 200-day SMA. The stock has a strong support at the 50-day SMA. The 14-day RSI looks neutral at 54.6.

ExxonMobil stock looks undervalued

ExxonMobil stock trades at an NTM (next-12 months) EV (enterprise value)-to-EBITDA multiple of 7.05x. The multiples look reasonable looking at the uptrend in energy prices. If crude oil prices continue to trend upwards, analysts could upwardly revise ExxonMobil’s earnings estimates.

ExxonMobil stock forecast

Last month JPMorgan reiterated ExxonMobil as overweight. “Altogether, we think XOM’s board now has decades of experience in business transformation, appropriate expertise in Energy Transition and an ability to think differently about the years ahead,” it said in the release.

Bank of America also reiterated its buy rating on the stock last month. “We continue to believe XOM’s outsize, counter cyclical investment and acquisitions at the bottom of the cycle sets up long-term visibility to expand free cashflow at a pace that can support sustained dividend growth,” it said in its note.

ExxonMobil stock looks a good buy

ExxonMobil stock has a median target price of $66 which is a premium of 4.5% over current prices. Its highest and lowest target prices are $55 and $90 respectively. Of the 28 analysts covering ExxonMobil stock, nine have a buy rating while 18 have a hold rating. One analyst has a sell rating on XOM stock.

ExxonMobil has a healthy dividend yield of 5.5%. The company could increase the dividend further looking at the rising crude oil prices. The stock could see further upside looking at the uptrend in energy prices and the reasonable valuations of XOM.

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