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Stock Market News: ExxonMobil Loses Energy; Tilray Takes a Tumble

By Dan Caplinger - Updated Apr 12, 2019 at 9:25AM

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More losses hit the market on Friday morning.

Friday morning brought more declines to Wall Street, which has steadily lost ground throughout much of the past week. The latest move lower came amid news that the U.S. labor market only managed to add 20,000 jobs during February, prompting new concerns that the domestic economy might be seeing the same problems that are plaguing other nations across the globe. As of shortly after 11:30 a.m. EST, the Dow Jones Industrial Average ( ^DJI 1.82% ) was down 88 points to 25,385. The S&P 500 ( ^GSPC 1.42% ) fell 14 points to 2,735, and the Nasdaq Composite ( ^IXIC 0.00% ) dropped 29 points to 7,393.

Stock analysts take close looks at companies of all sizes every day, and although it usually doesn't make sense to pay too much attention to the short-term impact their calls make, they can still raise important issues that you should know about as an investor. Today, analyst comments about ExxonMobil ( XOM 2.49% ) and Tilray ( TLRY ) affected their share prices, and they also point to some of the opportunities and challenges that the oil giant and the marijuana grower face.

Four oil wells pumping on a clear day near sunset.

Image source: Getty Images.

ExxonMobil faces a tricky future

Shares of ExxonMobil fell 2% after the integrated oil major got a downgrade from analysts at Cowen. The analyst company cut its rating on ExxonMobil from outperform to market perform and dropped its price target by 25% to $75 per share.

Cowen's primary complaint about ExxonMobil is that the energy company has had to make massive investments recently in order to try to bulk up its reserves and sustain growth. Earlier this week, ExxonMobil said that it would continue to spend roughly $35 billion a year on capital expenditures, keeping its spending levels in line with past levels even though the price of oil remains low.

Big spending made plenty of sense when oil fetched $100 per barrel or more. But hopes that crude would bounce back more quickly from its slump over the past several years have largely evaporated, and it'll take a substantial move higher for the energy markets in order to justify fully ExxonMobil's optimism in continuing to invest at these levels. The company isn't necessarily doomed to see its strategy fail, but its higher risk level makes many prefer alternative oil and gas giants instead.

Check out the latest earnings call transcript for ExxonMobil and Tilray.

A downbeat call on Tilray

Tilray also saw a similar decline, with its stock price falling 2% following comments from analysts at Jefferies. The cannabis company received an underperform rating from Jefferies, which recently initiated coverage on a wide range of marijuana stocks.

In evaluating Tilray's prospects, Jefferies noted that the marijuana player's valuation seems rich compared to its peers. With a market capitalization of $6.5 billion, Tilray is in the same league as industry giants Canopy Growth and Aurora Cannabis. Yet Tilray's production capacity doesn't come close to matching Canopy's or Aurora's at this point, and Tilray also lacks a high-profile partnership similar to what Canopy Growth has put together with beer and spirits giant Constellation Brands. Until Tilray's outlook looks a lot better than it does currently, Jefferies seems reluctant to award it such a high price tag.

Jefferies sees Tilray stock dropping to $61 per share, implying further downside from here. With the shares having been as high as $300 last fall, investors have to be disappointed with the way that Tilray has performed in recent months.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

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Stocks Mentioned

Exxon Mobil Corporation Stock Quote
Exxon Mobil Corporation
XOM
$61.28 (2.49%) $1.49
Tilray Stock Quote
Tilray
TLRY
Dow Jones Industrial Average (Price Return) Stock Quote
Dow Jones Industrial Average (Price Return)
^DJI
$34,639.79 (1.82%) $617.75
S&P 500 Index - Price Return (USD) Stock Quote
S&P 500 Index - Price Return (USD)
^GSPC
$4,577.10 (1.42%) $64.06
NASDAQ Composite Index (Price Return) Stock Quote
NASDAQ Composite Index (Price Return)
^IXIC
$15,254.05 (0.00%) $0.00

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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