Dow Stock Scores Double Upgrade

Macquarie upgraded XOM to "outperform" from "underperform"

Patrick Martin
Feb 14, 2019 at 9:30 AM
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The shares of Exxon Mobil Corporation (NYSE:XOM) are up 0.3% in electronic trading, after Macquarie raised its outlook on the energy name by two levels to "outperform" from "underperform," while setting a price target of $83. The analyst in coverage likes the company's multiple liquefied natural gas (LNG) projects and strong balance sheet, and notes XOM is "well positioned for the future, and is not being overly distracted by the energy transition debate." 

Since hitting an eight-year low of $64.66 on Dec. 26, Exxon Mobil stock has carved out an 18% gain. And thanks to yesterday's 1.1% pop -- sparked by a price-target hike to $85 from $82 at HSBC -- the equity closed above its 80-day moving average for the first time since early December, with XOM settling at $76.25

There is ample room for more analysts to issue bull notes on the Dow name. Of the 12 brokerages covering XOM, eight still rated it a "hold" or "strong sell" at last night's close. Further, the stock's consensus 12-month price target of $83.54 is a slim 9.6% premium to current trading levels.

There could even be pessimism unwound in the options pits. The security's Schaeffer's put/call open interest ratio (SOIR) of 0.70 sits in the 94th percentile of its annual range. This suggests short-term options players have rarely been more put-heavy in the past year. 

More specifically, the March 75 put is home to peak open interest of 15,076 contracts. The bulk of this activity occurred yesterday, when nearly 12,000 contract crossed the tape. One notable trade was a block of 5,637 March 75 puts that was likely bought to open for $512,967 (number of contracts * $0.91 premium paid * 100 shares per contract). This initial cash outlay represents the most the put buyer stands to lose, should XOM stock settle north of $75 at March options expiration, while profit will accumulate on a move below $74.09 (strike less premium paid).

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