Wednesday, October 30, 2013

ExxonMobil – Go For It

exxon-bull-bear

 ExxonMobil Corp’s (XOM) market capitalization is around $379 billion, which makes it the world’s largest non-state-owned oil company in terms of market cap. This article takes a look at the base, bull and bear cases for the company’s stock, and a look into why its recent selloff makes it a good buy.

Base Case:

The base case target price for Exxon is $92.52, assuming that it will earn $8.54 per share for the next year and the P/E multiple at which Exxon is currently trading (10.84x) will not expand. We have calculated the EPS value using our EPS model with $106.17 per barrel (bbl) as the Brent crude oil price for next year, which is also the mean sell side estimate.

 The estimate for the oil price assumes that the Federal Reserve will quit its quantitative easing program in the last quarter of 2014; geopolitical unrest in the Middle East and North Africa will ease; and OPEC producers like Saudi Arabia, UAE and Kuwait will develop existing reserves.

 The Henry Hub natural gas price is expected to average $4.14 per million British thermal units (MMBtu) through 2014, according to sell side analysts. The price is expected to rise to that level from the current $3.49/MMBtu following increased coal-to-gas switching in the power generation industry, which will spur natural gas demand.Read More : BP, COP, CVX, RDS, TOT, XOM

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