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UBS downgrades Exxon to sell on stretched valuations, predicts 11% pullback

A trader works on the floor of the New York Stock Exchange.
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A trader works on the floor of the New York Stock Exchange.

UBS on Thursday downgraded Exxon Mobil to sell from neutral, citing extended valuations and the potential for earnings to disappoint.

At the current levels, analysts at UBS say shares of Exxon trade at a 50 percent premium to its peers on a price-to-earnings basis and an 18 percent premium to the S&P 500.

"We estimate XOM is now trading at 12.4x and 11.6x our 2017 and 2018 DACF [debt-adjusted cash flow] estimates, respectively, well above its historical average of 8.2x and the global integrated average of 7.2x and 6.4x," equity analyst William Featherston wrote in a research note.