Is Exxon Mobil a Risky Investment?

| + More Articles
  • Like on Facebook
  • Share on Google+
  • Share on LinkedIn

With shares of Exxon Mobil (NYSE:XOM) trading around $100, is XOM an OUTPERFORM, WAIT AND SEE, or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Exxon Mobil is a manufacturer and marketer of commodity petrochemicals like olefins, aromatics, polyethylene, and polypropylene plastics, as well as a range of specialty products. The company has a number of divisions and affiliates with names that include ExxonMobil, Exxon, Esso, and Mobil, which operate or market products in the United States and other countries. Exxon Mobil’s principal business is energy, involving the exploration for and production of crude oil and natural gas; manufacture of petroleum products; and transportation and sale of crude oil, natural gas, and petroleum products.

Several of the largest oil companies in the world are doubling down in Russia despite moves by the West to isolate Russia and its economy. Exxon Mobil and BP (NYSE:BP) separately signed agreements with Rosneft, Russia’s state-owned oil company, to extend and deepen their relationships for energy exploration. The U.S. slapped sanctions on Rosneft CEO Igor Sechin in late April, freezing his assets and preventing him from obtaining visas. However, the sanctions do not extend to Rosneft itself, allowing Western companies to continue to do business with the Russian oil giant. Exxon Mobil signed an agreement with Rosneft, extending its partnership to build a liquefied natural gas (LNG) terminal on Russia’s Pacific coast. Known as the Far East LNG project, the export terminal will receive natural gas from Russia’s eastern fields as well as from Sakhalin-1, an island off Russia’s east coast.

T = Technicals on the Stock Chart Are Mixed

Exxon Mobil stock has struggled to make significant progress over the past couple of years. The stock is currently pulling back and may need time to stabilize before heading higher. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Exxon Mobil is trading above its rising key averages, which signals neutral to bullish price action in the near-term.

Source: Thinkorswim

Taking a look at the implied volatility (red) and implied volatility skew levels of Exxon Mobil options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Exxon Mobil options

15.19%

46%

44%

What does this mean? This means that investors or traders are buying a significant amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

July Options

Flat

Average

August Options

Flat

Average

As of Monday, there is average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a significant amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion.

More Articles About:

To contact the reporter on this story: staff.writers@wallstcheatsheet.com To contact the editor responsible for this story: editors@wallstcheatsheet.com

Yahoo Finance, Harvard Business Review, Market Watch, The Wall St. Journal, Financial Times, CNN Money, Fox Business