Skepticism Ramps Up on Downgraded Exxon Mobil Stock

XOM options traders have been buying puts

Mar 8, 2019 at 10:10 AM
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    The shares of Exxon Mobil Corporation (NYSE:XOM) are trading down 1.6% at $78.85, after Cowen and Company downgraded the big-cap energy name to "market perform" from "outperform," citing concerns over the company's recently announced plans to boost capital spending. The brokerage firm also slashed its XOM price target by 25% to $75 , saying the "counter-cyclical" investment strategy will likely weigh on dividend growth.

    This bearish outlook on XOM stock echoes the broader take by analysts. At last night's close, eight of the 13 brokerages covering Exxon Mobil maintained a "hold" or "strong sell" rating. Plus, the average 12-month price target of $83.86 is a slim premium to current trading levels.

    Skepticism is seen in the options pits, too. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), XOM's 10-day put/call volume ratio of 1.97 ranks in the 99th annual percentile, meaning puts have been bought to open over calls at a quicker-than-usual clip. The weekly 3/8 79-strike put, in particular, was targeted by put buyers over this two-week time frame.

    On the charts, XOM stock recovered from its eight-year low of $64.65, hit in the fourth quarter, tapping out at a three-month high of $80.55. This rally brought the stock north of its 200-day moving average, a trendline that is being tested in today's trading. Just below here is Exxon Mobil's 20-day trendline, which has served as support for most of 2019.


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