Here I am going to make an attempt to value Exxon Mobil Corporation, one of the leading global energy producing companies.
The main driver of Exxon Mobil's stock price is the price of oil. That said I forecast the price of WTI oil and Brent Crude oil to soon exceed 80 USD from the current prices of 67.39 USD and 72.58 USD currently.
What is more the Exxon Mobil seems to be undervalued on Price to Sales of 1.38. As revenue increases with the price of oil Exxon Mobil's profit will increase accordingly. So the current Price to Earnings ratio of 16.81 will decrease. Basically, most energy companies are value stocks. Their market capitalization has been hurt horrendously in 2014 and 2016 along with the fall of the price of oil. I believe there are still emotional scars in investors' memory from those falls, so the prices of energy stocks are depressed.
The main reasons for the forthcoming oil increase to 80 USD are OPEC's production cuts and the possibility of a military conflict which will engulf the whole Middle East along with Saudi Arabia and Iran which are major oil producers. An eventual war could even touch Russia which is the third largest oil producer in the world currently after USA and Saudi Arabia.
Exxon Mobil with its large scale production is poised to benefit from the coming oil price rise. What is more, the USA which is the main production site for Exxon Mobil is poised to become the world's largest oil producer this year(2018) thanks mainly to the hydraulic fracturing oil exploration boom.
So, I think Exxon Mobil market capitalization could hit 400 billion USD in 2018 which will reflect a price of circa 94.1864 USD, a 21% premium to the current Exxon Mobil price of 77.84 USD.
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Conflicts of interest: I may possess some of the securities,currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Kind regards,
Petar Posledovich
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