Growth stocks have been deeply hammered this year, with high inflation and rising interest rates weighing on growth stocks on all sides. But few actions illustrate dramatic upheaval at the top, as the first manufacturer of electric vehicles Tesla Inc. (NASDAQ: TSLA). TSLA stock has fallen 69.5% year-to-date, wiping $877 billion off its market capitalization. In comparison, the S&P500 declined by a more modest 19.7% over the period. Tesla fell from the fifth most valuable public company to thirteenth place with a market capitalization of $385 billion. Tesla’s misfortunes are well documented, including Musk’s takeover of Twitter and associated distractions; Fears that high inflation and rising interest rates will dampen consumer enthusiasm for electric vehicles, as well as investor nervousness about growth assets. TSLA shareholders are furious with CEO Elon Musk, The Wall Street Journal reports, for his Twitter antics and antics, which led to several title downgrades. Meanwhile, hordes of customers are canceling their Tesla orders.”His personality is absolutely tanking the Tesla brand. I can’t wait to have a life without Elone,” a biotech executive with a model lease said CNET. There is no Tesla CEO today. tweeted Gary Black, a hedge fund manager with about $50 million in TSLA stock, told Futurism.
Related: US Oil, Gas Rigs Up 193 This Year
But Tesla isn’t alone here: Most EV stocks have had a year to forget with rising costs, supply chain issues, growing competition and the threat of a potential recession. which caused many to sell massively.
Surprisingly, some Wall Street pundits haven’t given up on TSLA shares and are urging investors to use the selloff as a buying opportunity. Namely, Citi operated TSLA as a bullish contrarian action for 2023, while Baird analyst Ben Kallo still sees Tesla as a “better idea” in 2023. Meanwhile, Morgan Stanley says Tesla could extend its lead over EV rivals over the year to coming, and cited “valuation, cash flow, innovation and cost”. . “leadership” as the main reasons for maintaining an equivalent buy rating. Meanwhile, well-known contrarian investor Cathie Wood, known for betting big on older growth stocks as they fall, recently stocked up on more than 25,000 shares of the electric vehicle giant.
In stark contrast, things couldn’t have gone any differently for Tesla’s biggest fossil fuel rival, Exxon Mobil Corp. (NYSE:XOM). Exxon Mobil had the biggest rise in the S&P 500 this year, with the energy giant surging almost like tech stocks did during the tech boom thanks to high oil and gas prices triggered by the energy crisis. Shares of XOM have soared 72% this year, adding $190 billion to the company’s market value. Exxon’s rise in market value outpaces all companies in the S&P 500, making Exxon Mobil the eighth most valuable stock in the S&P 500. That’s a remarkable jump considering it only ranked in the 27th in the S&P 500 a year ago. Exxon was the most valuable company in the S&P 500 in 2011 until Apple Inc. (NASDAQ: AAPL) surpassed it in 2012.
While Citi picked XOM as one of its bearish contrarian stocks for 2023, the stock is viewed favorably by most Wall Street analysts, as evidenced by its Average target price of $118.89, good for a 10% increase. The energy sector in general is expected to outperform the market again in 2023, and XOM should do just fine, given that it is still cheap with a PE (Fwd) of 7.9. In October, Exxon raised its quarterly dividend of $0.03 per share to $0.91 per share marking the 40th consecutive year of increased earnings, keeping it in the elite group of dividend aristocrats. XOM shares now yield 3.3%.
The outlook for the energy sector remains bright. According to a recent Moody’s Research Reportindustry earnings will broadly stabilize in 2023, although slightly below recent peak levels.
Analysts note that commodity prices have fallen from very high levels at the start of 2022, but predicted that prices are likely to remain cyclically high through 2023. This, combined with modest volume growth, will support a strong cash flow generation for oil and gas. producers. . Moody’s estimates that U.S. energy sector EBITDA for 2022 will reach $623 billion, but will drop slightly to $585 billion in 2023.
Analysts say weak capital spending, growing uncertainty about future supply expansion and the high geopolitical risk premium will, however, continue to support cyclically high oil prices. Meanwhile, strong US LNG export demand will continue to support high natural gas prices.
The combined dividend and buyout yield for the energy sector is now approaching 8%, which is high by historical standards. Similar high levels occurred in 2020 and 2009, which preceded periods of strength. By comparison, the combined dividend and buyback yield for the S&P 500 is closer to 5%, which is one of the largest spreads ever in favor of the energy sector.
In other words, there simply isn’t a better place for people investing in the US stock market to park their money if they’re looking for serious earnings growth.
By Alex Kimani for Oilprice.com
More reading on Oilprice.com:
0 Comments