Winter is coming: The ‘best country in the world’ plans to ban electric cars amid energy crisis. Is It Time to Reconsider Oil Stocks? Here are 3 big pieces
Electric vehicles have become increasingly popular in recent years. But EVs could take a major hit due to what happened in Switzerland.
The country is considering contingency measures in the event of a power outage this winter, according to a report in the Telegraph on Saturday.
Switzerland – the best country in the world according to a recent analysis by US News & World Report – could cut shop hours, turn down the thermostats in buildings and limit private use of electric cars to “absolutely necessary trips”.
These proposed measures have not yet been translated into law. But they serve as a reminder that electricity doesn’t magically appear at every outlet — and electric vehicles aren’t powered by fairy dust.
Despite the increasing focus on ESG investing, traditional energy is not dead. The Energy Select Sector SPDR Fund (XLE) — which offers exposure to oil and gas companies — is up 52% year-to-date.
Additionally, Wall Street sees further upside for some companies involved in hydrocarbon exploration. Here’s a look at three of them.
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Shell (NYSE:SHEL), headquartered in London, is a multinational energy giant with operations in more than 70 countries. It produces around 3.2 barrels of oil equivalent per day, has interests in 10 refineries and sold 64.2 million tons of liquefied natural gas last year.
It’s also a staple for global investors. Shell is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange.
The company’s NYSE-listed shares are up 28% year-to-date.
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Piper Sandler analyst Ryan Todd sees an opportunity in the oil and gas supermajor. Last month, the analyst reiterated an “overweight” rating on Shell while raising its price target to $71 from $65.
Considering that Shell is trading at around $57 a share today, Todd’s new price target implies a potential upside of 25%.
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Chevron (NYSE:CVX) is another oil and gas company benefiting from the commodity boom.
For the third quarter, the company reported earnings of $11.2 billion, up 84% from the same period last year. Sales and other operating income totaled $64 billion for the quarter, up 49% year over year.
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In January, Chevron’s board of directors approved a 6% increase in its quarterly dividend rate to $1.42 per share. That gives the company an annual dividend yield of 3.2%.
The stock has also had a nice rally, up 46% in 2022.
Morgan Stanley analyst Devin McDermott gives Chevron an “equal weight” rating (not the most optimistic rating), but raised the price target to $196 from $193 in October. This implies a potential upside of 12% from current levels.
Exxon Mobile
With a market cap of over $430 billion, Exxon Mobil (NYSE:XOM) is larger than Shell and Chevron.
The company also boasts the strongest stock price performance of the three in 2022 — Exxon shares are up 67% year-to-date.
It’s not hard to see why investors like the stock: The oil giant is bubbly about earnings and cash flow in this commodity price environment. For the first nine months of 2022, Exxon posted earnings of $43.0 billion, a huge increase from $14.2 billion in the same period last year. Free cash flow for the first nine months totaled $49.8 billion, compared to $22.9 billion for the same period last year.
Solid finances allow the company to return money to investors. Exxon pays quarterly dividends of 91 cents per share, which translates to a 3.4% annual yield.
Jefferies analyst Lloyd Byrne has given Exxon a buy rating and a price target of $133 — about 25% above the stock’s price today.
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This article is informational only and should not be construed as advice. It is provided without any guarantee.