Winter is coming: The 'best country in the world' is planning to ban electric cars amid the energy crisis. Is it time to revisit oil stocks? Here are 3 big playsElectric vehicles have become popular over the past few years. But EVs could take a significant hit based on what’s happening in Switzerland.
According to a report in the Telegraph on Saturday, the country is considering emergency measures in case of an electricity supply shortage this winter.
Switzerland — the best country in the world according to a recent analysis from US News & World Report — could shorten store operating hours, lower the thermostats at buildings, and limit the private use of electric cars to “absolutely necessary journeys.”
These proposed measures haven’t been passed into law just yet. But they serve as a reminder that electricity doesn’t magically appear at every wall outlet — and EVs don't run on fairy dust.
Despite the increasing focus on ESG investing, traditional energy is not dead. The Energy Select Sector SPDR Fund (XLE) — which provides exposure to oil and gas companies — is actually up 52% year to date.
Moreover, Wall Street sees further upside in quite a few companies engaged in hydrocarbon exploration. Here’s a look at three of them.
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ShellHeadquartered in London, Shell (NYSE:SHEL) is a multinational energy giant with operations in more than 70 countries. It produces around 3.2 barrels of oil equivalent per day, has an interest in 10 refineries, and sold 64.2 million tons of liquefied natural gas last year.
It’s a staple for global investors, too. 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.
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 his price target from $65 to $71.
Considering that Shell trades at around $57 per share today, Todd’s new price target implies a potential upside of 25%.
ChevronChevron (NYSE:CVX) is another oil and gas supermajor that’s benefiting from the commodity boom.
For Q3, the company reported earnings of $11.2 billion, which represented an 84% increase from the same period last year. Sales and other operating revenues totaled $64 billion for the quarter, up 49% year over year.
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In January, Chevron’s board approved a 6% increase to the quarterly dividend rate to $1.42 per share. That gives the company an annual dividend yield of 3.2%.
The stock has enjoyed a nice rally too, climbing 46% in 2022.
Morgan Stanley analyst Devin McDermott has an ‘equal weight’ rating on Chevron (not the most bullish rating) but raised the price target from $193 to $196 in October. That implies a potential upside of 12% from the current levels.
Exxon MobilCommanding a market cap of over $430 billion, Exxon Mobil (NYSE:XOM) is bigger than Shell and Chevron.
The company also boasts the strongest stock price performance among 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-producing giant gushes profits and cash flow in this commodity price environment. In the first nine months of 2022, Exxon earned $43.0 billion in profits, a huge increase from the $14.2 billion in the year-ago period. Free cash flow totaled $49.8 billion for the first nine months, compared to $22.9 billion in the same period last year.
Solid financials allow the company to return cash to investors. Exxon pays quarterly dividends of 91 cents per share, translating to an annual yield of 3.4%.
Jefferies analyst Lloyd Byrne has a ‘buy’ rating on Exxon and a price target of $133 — around 25% above where the stock sits today.
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