BofA names XOM stock among best buys for Q3 despite falling oil price: time to buy?

By: Motiur Rahman
Motiur Rahman
Md Motiur enjoys researching how companies are solving challenges the world will face over the coming decades. In his… read more.
on Jul 19, 2021
  • OPEC+ members agreed on a deal to gradually increase output to pre-pandemic levels.
  • Oil prices edged lower alongside oil stocks, with Exxon Mobil shares falling more than 4% on Monday.
  • XOM stock appears to have found support just below $55.00 per share. Should you buy the rebound?

Oil prices edged lower again on Monday after OPEC+ agreed on a deal to gradually increase production output to pre-covid levels. The group had come to a stalemate a week ago after Saudi Arabia opposed the UAE’s demand to increase its production by 4 million barrels a day. 

The news of the agreement affected oil prices and oil stocks, with Exxon Mobil Corp (NYSE:XOM) stock price falling more than 4%. Exxon Mobil shares are now down more than 14% off the company’s 12-month highs of $64.66 per share achieved on 25th June.

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Bank of America (BofA) analysts named XOM stock among the top picks for Q3 2021, tipping the stock price to bounce back sharply.

Is XOM stock a good buy in Q3 2021?

From a valuation perspective, Exxon Mobil shares trade at a lucrative forward P/E ratio of just 12.19. The company’s short-term performance is affected by this year’s prospective earnings decline of about 265%. 

However, analysts expect Exxon Mobil’s bottom line to resume growth with an increase of 18.95% next year before averaging 10.14% for the next five years. Exxon Mobil is yet to return to profitability on a trailing 12-month basis amid the covid pandemic. However, things could change soon if oil prices bounce back after the recent pullback. Therefore, XOM stock price could spike momentarily before pulling back after that amid limited bottom-line growth.

Source – TradingView

Technical overview: Exxon Mobil stock price forecast for July 2021

Technically, Exxon Mobil shares appear to have plunged to oversold conditions following Monday’s pullback. The stock price also dropped below the 100-day moving average for the first time this year, creating a perfect opportunity for a rebound. Therefore, investors can target rebound profits at approximately $57.83 or higher at $61.32. The key support levels are $52.01 and $49.06.

Bottom line: the catalyst for XOM stock price rebound

Although analysts expect Exxon Mobil earnings to decline this year, the market may be pricing in these adverse circumstances. Oil price declines triggered the recent pullback, meaning if the light crude oil recovers, XOM stock price will also bounce back. Furthermore, the XOM shares have already fallen to oversold conditions, meaning a rebound could be imminent.

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