[NYSE: XOM]: Exxon Mobile Corporation (XOM) has a Zack’s rank of 5 for 2019. This means that Exxon Mobile is a strong sell. There are a number of reasons why this stock is a strong sell in 2019. The first one is that Exxon Mobile has been making heavy upstream investments for the past few years, and intends to continue with them all through 2019. While these investments are great for the company’s long-term growth, they are capital intensive and may take years before they can give any returns on investments. Upstream activities in the oil and gas industry involve exploring for crude oil and the process of its extraction. This process is time and capital intensive, and investors can’t expect much in form of returns in 2019. Since revenues and return on equity are key drivers for stock value growth, Exxon Mobile is unlikely to give any significant growth in 2019. By extension, this means that its stock is likely to underperform.
There is also the fact that the oil market is unstable at the moment. With Qatar out of OPEC and a slowing global economy, demand for oil, relative to its supply could remain sluggish. This means that oil companies are unlikely to outperform the market in 2019. Opportunities for growth this year lie in other sectors. For instance, certain big tech companies like Amazon offer better prospects for value growth this year.
The possibility of Exxon Mobile (XOM) to underperform is quite evident in its stock movements in the past 12-months. In this period, it has underperformed the S&P 500. In the last 52 weeks, Exxon Mobile has lost 21.26% of its value, while the S&P 500 has only lost 10.91% in the same period.
However, this doesn’t mean that Exxon Mobile is not as good as an investment. This company holds great prospects for the long-term. That’s because, with its experience in oil exploration, Exxon Mobile is likely to have a high degree of success in its upstream activities. This means that in a few years, Exxon Mobile’s heavy investments will pay off big time, and could see this stock soar.
Besides, Exxon Mobile controls all levels of the market in the oil business. This means that even as the company makes capital intensive investments, it is still in a good position for growth. Proof to this is in its quarterly revenue growth (yoy), which stands at 25.20%. This indicates that its revenues are on the rise in spite of its more long-term investment. Exxon Mobile also has a high quarterly earnings growth (yoy) of 57.20% and a payout ratio of $58.46%. This makes it a good hold for investors seeking dividends. It offers a good passive income, as an investor waits for the share price to recover once the company’s heavy investments begin to pay off. In essence, from a long-term perspective, 5 years and above, Exxon Mobile is definitely a worthy hold.