With crude oil having a strong week and closing up around $46.50 per barrel (NYMEX WTI), some investors will again be wondering if oil is starting to stabilize in that $45 to $50 per barrel range. Some investors will even try yet again to find value in the oil patch. 24/7 Wall St. would remind readers that the market, rather than pundit predictions and emotions, will determine the price of oil ahead.
Investors have been picking through the oil patch for some time now to identify where there may be opportunity and where there may still be too much risk. If there is one theme that seems to be prevalent, it is that the larger oil and gas outfits almost certainly are going to be able outlast the smaller and less experienced second-tier and third-tier oil and gas outfits.
This is why investors have been looking for opportunities in the mid-cap and large-cap stocks. And, fortunately or unfortunately for the energy patch, it turns out that there was a group of analysts rallying around a key solar player this past week as well.
24/7 Wall St. tracked five key analyst calls that stood out handily above the rest in the oil patch, and these were calls in the larger companies rather than in the speculative companies. These also all come with Buy or Outperform ratings, and the analyst reports generally have a price target that was higher than or very close to the consensus price target from Thomson Reuters.
Investors need to understand that these should not in any way be considered short-term opportunistic swing trades. If oil rolls back over and heads south, it is only prudent to expect that these oil stocks will see their share prices head south as well. Also, we have included one industry-leading alternative energy sector in this week’s reporting. Here are the positive views from calls in Exxon Mobil, Phillips 66, Suncor, Weatherford and First Solar.
Exxon Mobil Corp. (NYSE: XOM) was reiterated as Buy at Bank of America Merrill Lynch on the heels of the oil and gas giant’s earnings report Friday morning. The firm also kept a $100 price objective alive and well on Exxon Mobil. His take is that Exxon is at a relative advantage over the supermajor oil stocks in that it is coming to the end of major spending cycle. This will allow it generate free cash flow that will should assist it through this down cycle.
Exxon Mobil closed up 0.6% at $82.74 on Friday. It has a consensus analyst price target of $82.16 and a 52-week trading range of $66.55 to $97.20. For whatever this is worth, this Merrill Lynch price target matches the highest of analyst calls.
Merrill Lynch’s report said:
Our price objective of $100 per share is based on a DCF valuation that assumes long term Brent and WTI oil prices of $80 per barrel and $75 per barrel respectively a weighted average cost of capital of 8% and a 0% terminal growth rate.