Goldman Sachs thinks it’s time to ease exposure to Exxon Mobil after the oil giant’s massive multiyear run. The firm downgraded the oil giant’s stock from buy to neutral on Monday, with a $125 per share price target, or 5.6% upside compared to Friday’s $118.34 close. Goldman Sachs analyst Neil Mehta noted the firm upgraded Exxon in December 2020. In that time, the stock has surged more than 170%, while the S & P 500 is up about 13% in that time. That hot run makes Exxon today a less engrossing pick among oil stocks, he said. “We ultimately turn more Neutral on XOM, where we believe (a) valuation appears less compelling; there are reasonable compelling alternatives to XOM … and (c) some non-oil tailwinds are abating, including Refining margins, Chemicals, global gas prices,” he said. XOM mountain 2020-12-16 Exxon shares since late December 2020 Mehta said that Exxon’s cost cutting, leadership changes, long-term project investments as well as stronger conviction on stock repurchases and divided yields helped drive a “structural re-rate” after years of underperformance. Now, “the valuation of ExxonMobil now appears to better reflect the structural turnaround in the business,” Mehta said. Still, Goldman remains optimistic on the overall forward outlook on oil prices. “While we recognize that we no longer have a Buy rating on the two largest US oils, Exxon and Chevron, we do believe there is absolute value in a number of equities in the Energy complex and still maintain the long-term positive view on oil prices (where we assume $85/b Brent through the cycle vs. $70/b on average in the forwards through 2030),” Mehta said. Exxon reported record profit for the first quarter on Friday, which surpassed Wall Street estimates at the company cited strong production expansion despite an overall decrease from record-high profits a threat to margins. Year to date, the stock is up 7.3%. Shares fell 1.6% before the bell. — CNBC’s Michael Bloom contributed to this report.
