The Energy Crisis: Tesla’s Fall and Exxon’s Rise
This year has been a rough year for growth stocks, as high inflation and rising rates have strained all kinds of growth equities. However, few stocks are able to demonstrate the qualities of growth stocks. dramatic shake-up The top, such a leading EV maker Tesla Inc. (NASDAQ: TSLA). TSLA stock dropped 69.5% during the year to date, wiping off a shocking $877 billion in its market cap. Comparatively, the S&P 500 Over the same period, it has fallen by a much smaller 19.7%. Tesla is now the thirteenth most valuable public company, with a market capital of $385 billion.
Tesla’s woes are well documented, including Musk’s Twitter takeover and related distractions; worries that high inflation and rising interest rates will dampen consumers’ enthusiasm for EVs, as well as investor jitters about growth assets. TSLA shareholders are mad at Elon Musk. The Wall Street Journal reportsHe is known for his Twitter antics. This has resulted in several downgrades of the stock. “In the meantime, customers are cancelling their Tesla orders,”His personality is absolutely destroying the Tesla brand. I am looking forward to an Elon-free existence.e,’’ a biotech exec with a Model S lease has told CNET. CNET. tweeted Futurism was told by Gary Black, a manager of a hedge fund with $50,000,000 worth of TSLA stock.
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Tesla isn’t the only one. Many EV stocks have experienced a year of rising costs, supply chain issues and increased competition. This has caused many to sell off their shares.
Surprisingly, Wall Street pundits are still recommending that investors use the selling opportunity to buy TSLA stock. Citi has tapped TSLA to be a customer. bullish contrarian stock for 2023, while Baird analyst Ben Kallo still sees Tesla as a “Best Idea” stock in 2023. Meanwhile, Morgan Stanley says Tesla could extend its lead over its EV rivals in the coming year, and has cited “valuation, cash flow, innovation and cost leadership” as key reasons to maintain a Buy-equivalent rating. Cathie Wood is a famous contrarian investor who bets big on ex-growth stocks falling, and recently bought more than 25K shares.
In sharp contrast, things could not have gone differently for Tesla’s biggest fossil fuel rival, Exxon Mobil Corp. (NYSE: XOM). Exxon Mobil has enjoyed the biggest rise in the S&P 500 this year, with the energy giant jumping almost like technology stocks did in the tech boom thanks to high oil and gas prices triggered by the energy crisis. XOM shares have soared 72% this year, adding $190 billion to the company’s market value. Exxon’s increase in market value surpasses any company in the S&P 500, making Exxon Mobil the eighth most valuable stock in the S&P 500. That’s a remarkable jump considering that it only ranked 27th most valuable in the S&P 500 a year ago. Exxon was the most valuable S&P 500 company in 2011 until Apple Inc. (NASDAQ:AAPL) It was exceeded in 2012.
Although Citi selected XOM among its bearish contrarian stocks in 2023, most Wall Street analysts view the stock favorably, as shown by its $118.89 average price targetThis is a 10% upside. The energy sector in general is expected to outperform the market again in 2023, and XOM should be just fine, considering it’s still cheap with a PE (Fwd) of 7.9. Exxon increased its quarterly dividend from $0.03 to $0.91 in October. This marked the 40th consecutive year that the company has increased its dividend. It is now part of the elite group known as Dividend Aristocrats. XOM shares now yield 3.3%
The energy sector’s outlook remains bright. According to a recent Moody’s research reportIndustry earnings will stabilize in 2023 overall, but they will be slightly lower than recent highs.
Analysts note that commodity prices have fallen from high levels in 2022 but that they expect prices to remain strong cyclically through 2023. This will help oil and gas producers generate strong cash flow, despite modest volume growth. Moody’s estimates that the U.S. energy sector’s EBITDA for 2022 will clock in at $623B but fall slightly to $585B in 2023.
However, analysts believe that rising uncertainty about the future expansion of supplies and low capex will continue to support high oil prices. Strong U.S. export demand for LNG will keep prices high in the interim. high natural gas prices.
The current combined dividend/buyback yield for energy sector is close to 8%. This is an impressive level, according to historical standards. Similar levels were reached in 2020, 2009 and 2009 which occurred before periods of strength. In comparison, the combined dividend and buyback yield for the S&P 500 is closer to five percent, which makes for one of the largest gaps in favor of the energy sector on record.
In other words, there simply aren’t better places for people investing in the U.S. stock market to park their money if they are looking for serious earnings growth.
Alex Kimani, Oilprice.com
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