At a current price of $61.55, I believe ExxonMobil is a great value investment with a high target price of $90.00 (based on a forecast from 22 analysts) representing an upside potential of ~46%. In addition, the stock yields a high dividend yield of 7.3% (6th largest in the S&P 500).
Exxon Mobil Corporation (NYSE: XOM) is involved in the exploration, production, transportation and sale of crude oil and natural gas in the United States and internationally.
Mission: Continue being an industry-leading inventory of resources by meeting the world's increasing demand for reliable and affordable energy while reducing emissions and risks associated with climate change.
Strategy: Increasing organizational speed, agility, level of innovation and ability to bring new ideas to the market effectively.
Major Shareholders: Vanguard Group Inc (8.13%), Blackrock Inc (6.55%), State Street Corp (5.71%)
Business Segments: Downstream segment manufactures and trades petroleum products. The upstream segment produces crude oil and natural gas. The chemical segment offers petrochemicals.
Key Business Segments by Revenue (2020): Downstream (78.9%), Chemical (12.9%), Upstream (8.1%)
Geographic Segmentation: United States (53%), Canada (11.1%), United Kingdom (9.3%), Singapore (8%), France (7.3%), Italy (6%), Belgium (5.3%)
2020 Valuation and Financial Results:
(All Values in USD BILLION unless noted otherwise)
Enterprise Value (EV): $333.7
Market Cap: $174.5
Total Debt (2020): $67.6
- Accounts for approx. 21% of assets
Revenue (2020): $181.5
Cash (2020): $4.4
Gross Profit Margin: 31.4%
Operating Margin: -15.91%
By the year 2040, there is a projected world population of 9.2 billion representing ~16.45% change in today's current population.
Almost half of the world's energy is dedicated to industrial activity
- Steel, cement and chemicals are essential materials to satisfy needs (home and road construction, appliances, etc) which are energy-intensive products
Global energy demand rises by 20%
- By 2040, the anticipated 20% increase in energy demand reflects the growing population and rising prosperity
- Global energy demand by transportation accounts for 30%
- China and India contribute to
Global electricity demand rises 60%
- Electrifying households, businesses, factories, smart appliances, etc. creates a greater need for electricity
- Solar, wind and natural gas contribute the most to meeting growth in electricity demand
- Electricity generation largest and fastest-growing sector primarily due to expanding electricity access to developing countries
Risks and Mitigations: Climate Crisis Concerns
- In December 2020, they released a 5-year plan that detailed their plan to address a lower-carbon future
- Goal to reach an industry-leading greenhouse gas performance across its businesses by 2030
- Shifting from less carbon-intensive sources to electricity such as renewables, nuclear and natural gas to reduce CO2 emissions
- Expected to deliver 30% reduction in absolute greenhouse gas emissions in Upstream business and 40%-50% reduction in absolute flaring and methane emissions
- One of the most aggressive reduction plans in the industry
ExxonMobil Supports the Paris Agreement
- The Paris Agreement is an agreement within the UN Framework on Climate Change and aims to reduce global greenhouse gas emissions in an effort to limit the global temperature increases
- Commitments from all major emitting countries (a total of 197 countries ) to cut their climate pollution
- Has welcomed the agreement since 2015/2016 and continuously investing in lower-emission initiatives such as energy efficiency, cogeneration, flare reduction, carbon capture, etc
- Additional $3B invested into initiatives since Paris Agreement
- ExxonMobil committed to minimizing greenhouse gas emission while meeting the growing demand for affordable and reliable supplies of energy
The stock price of ExxonMobil moves relative to the price of crude oil. In an article posted today, May 6th, oil prices fell 1% on worries over the pandemic surge in India. Projections over India's COVID cases are expected to peak around May 15th which can have an impact on oil prices and lead to a drop in ExxonMobil's stock price. If the drop in oil prices is drastic enough from India's surging cases, this creates a great entry point for individuals to get in on ExxonMobil.
ExxonMobil is a company that is repositioning for a lower-carbon energy future by investing more into new technology and initiatives that will align with the growing economy while addressing global concerns. They are a good investment opportunity that has shown a steady rebound since the market fall in March 2020 due to COVID-19 and will continue to be a great growth stock with a lot of upside potential.