Exxon Mobil (XOM) +3.7% in Tuesday’s trading despite a downgrade to a rare Sell-equivalent rating for the company, as BNP Paribas cut shares to Underperform from Neutral with a $125 price target, saying it struggles to support the stock’s “lofty” current valuation.
“After a year of very strong absolute and relative performance augmented by a 16% absolute rise since the start of 2026 we are, once again struggling with Exxon’s valuation,” BNP Paribas analyst Lucas Herrmann wrote, noting an “essentially committed cash return – buyback and dividend – of ~6.6% is not unattractive relative to the broader S&P, making Exxon an easy name to hide in for those who want to hedge out oil price risk… Yet to the extent that it is now notably ahead of our estimates for free cash yield and requisite debt funding, we find it hard to see the valuation moving higher.”
Exxon (XOM) is unquestionably well-managed, with a healthy balance sheet and offering robust long-term hydrocarbon growth, and as the oil sector behemoth, Q4 results were modestly ahead of the Street, “yet as the major source of this quarter’s outperformance evaporates, not least late autumn’s exceptional rise in refining margins, we expect profits to normalize with added near-term pressure suggested given guidance for Product Solutions downtime.”
Shares of oil companies trade mostly higher Tuesday as crude oil futures rebound from sharp declines in the previous session.