What happened
With only a week to go before the company's first-quarter earnings report, shares of ExxonMobil (XOM 1.37%) are sliding this morning as analysts duel over the oil giant's prospects.
One of these analysts -- investment bank Piper Sandler -- announced this morning that it is trimming its price target for Exxon to $134 (down from $135) on demand risks. As of 10:30 a.m. ET on Thursday, Exxon shares were down 2.6% in response.
NYSE: XOM
Key Data Points
So what
According to Piper Sandler, investors are worrying that a recession will hurt demand for oil products. The analyst is actually "constructive" on Exxon's business, according to The Fly, and is maintaining an overweight rating on the shares. Still, with Piper's price target on Exxon moving lower, investors might be worried that all is not well.
Confusing the matter further, StreetInsider reports today that investment bank HSBC is raising its price target on Exxon. But while this would appear to offset the bad news from Piper, HSBC is only raising it to $115.50, just a couple of dollars more than what it already sells for.
Moreover, HSBC isn't recommending buying Exxon, instead rating the shares a hold.
Now what
Need a tiebreaker to figure this all out? Well, you're in luck, because just yesterday, UBS weighed in with a clear vote in favor of Exxon to outperform.
Initiating coverage with a buy rating, UBS analyst Josh Silverstein called Exxon the "leader of the pack" among oil stocks, and gave it a $144 price target, implying 26% upside (in addition to a respectable 3.2% dividend yield).
In particular, UBS says that after years of underperformance, Exxon is now generating powerful free cash flow: more than $36 billion in 2021, and a staggering $58.4 billion last year, both of which far outstrip the company's reported net income. With this cash gusher, UBS predicts that as early as mid-2024, Exxon's balance sheet will flip from a net debt to a net cash position.
Whatever specific numbers Exxon produces for its first quarter next week, if this long-term trend continues, an Exxon with massive cash production, no net debt, and a valuation of just 8.1 times trailing free cash flow looks like a good bet to me.
