Exxon Mobil Stock May Be Heading To All-Time High
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Summary:
- Exxon Mobil Corporation shares could rise if crude oil prices continue to increase, with a potential 3 million barrel per day shortage predicted next quarter.
- Analysts have been increasing earnings estimates for Exxon in 2023 and 2024, indicating a positive outlook for the company.
- An options trader is betting on Exxon’s stock to rise to $130 or higher, potentially reaching a new all-time high.
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Exxon Mobil Corporation (NYSE:XOM) shares could be heading higher, which could be the case if crude oil prices (CL1:COM) keep rising. Certainly, Saudi Arabia and Russia have been playing their part in raising oil prices by cutting back on production. Meanwhile, OPEC oil Bloomberg suggests there could be as much as a 3 million barrel per day shortage next quarter – the most significant deficit in a decade.
The higher oil prices already appear to be turning around earnings estimates for the company. Since mid-July, analysts have been increasing their earnings and sales estimates for 2023 and 2024. For 2023, earnings estimates have climbed to $9.29 per share from $9.05 on July 31. Meanwhile, 2024 earnings estimates have increased to $9.26 per share from $8.71 over the same period.
Bloomberg
$130?
At least, based on the 2024 earnings estimates, the stock appears to be fairly valued at current levels, with a P/E of 12.6. The current P/E ratio has been around the average valuation of the shares since late 2018. It would suggest further room for the P/E ratio to expand to higher levels, especially if the market perceives that oil prices and earnings estimates can climb. Just taking the stock back to a P/E ratio of 14.3, which was the high in March 2022, the shares would be valued at $132.40.
Exxon 
Betting on Higher Prices
The prospects of rising oil and a stronger fundamental outlook for the stock may be getting an options trader to bet that Exxon can increase from its current price of around $116. On September 18, the open interest levels for Exxon November 17, $130 calls rose to 6,139 contracts. The data shows that most of these calls traded on the ASK for around $0.65 to $0.70 per contract, indicating they were bought.
This would suggest the trader is betting on the stock rising to $130 or higher by the November expiration date. However, this could also be a directionally bet, with the trader just looking for the stock price to rise and the options to climb in value without climbing the strike price.
Trade Alert
An All-Time High?
Meanwhile, the shares have climbed to a significant resistance area around $118. The stock had previously reached this level 2 prior times. It would signal a potential triple top if it fails to push through on this attempt. However, one would think that if oil were to continue to move higher, then Exxon’s stock could continue to move higher.
A push above $118 would be a new all-time high for Exxon. It is tough to say just how much further it could climb. But a 1.618% extension of the rally off the low on July 18 makes a rally to around 125 possible.
Trading View
It would seem that as long as oil can keep pushing higher or, at a minimum, hold its recent gains, earnings estimates for Exxon can keep climbing. Then, there seems to be a reasonable chance for the stock to move from its current level to a new all-time high.
It would explain why an options trader is making a bullish bet on the stock presently.
Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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