ExxonMobil Downgraded After 38% 12-Month Rally, $153 Target Scrapped
Wolfe Research cut ExxonMobil to Peer Perform from Outperform after a 23% year-to-date share rally that lifted gains to 38% over 12 months. The broker removed its $153 target, saying a DCF model using $70 Brent and 7% WACC leaves shares fairly valued with 20% of production under force majeure.
1. Analyst Downgrade and Price Target Removal
Wolfe Research lowered ExxonMobil’s rating from Outperform to Peer Perform and withdrew its $153 price target. The change marks the end of a five-year stretch as the firm’s top major oil pick, citing fully reflected free cash flow prospects in the current share price.
2. Stock Performance Rally
ExxonMobil shares have climbed 23% year-to-date and 38% over the last twelve months, surpassing both the S&P 500 and the broader energy sector. The rally has been attributed partly to factor rotation and geopolitical risk premiums boosting energy names.
3. Valuation Model Details
The downgrade rests on a discounted cash flow model using a long-term Brent crude price of $70 per barrel and a 7% weighted-average cost of capital. At $80 per barrel, the model suggests a fair value near $174, indicating limited upside from current levels.
4. Production Risks and Future Growth
Approximately 20% of ExxonMobil’s production faces force majeure conditions in the Middle East, posing potential cash flow risks if disruptions extend into the second quarter. Management also acknowledged gaps in post-2030 cash flow growth despite ongoing Guyana development phases.