Wall Street is turning positive on Exxon Mobil with JPMorgan becoming the second major bank to upgrade the stock this week. JPMorgan upgraded Exxon Mobil to overweight from neutral on Wednesday, sending shares of the oil company up nearly 1% in premarket trading. This is the first time JPMorgan's analyst Phil Gresh recommends buying the stock after seven years of coverage. Morgan Stanley raised the stock to a buy on Monday due to confidence it could support its hefty dividend and Gresh feels the same way. Exxon Mobil is "back from the dividend cut drink with levers to pull," Gresh said in a note to clients. "As we sit here today, we think that the bar is materially lower, execution might finally be turning a corner, 2021 consensus is too low (even at $50/bbl Brent), the > 7% dividend yield is more secure and valuation is more reasonable." Shares of Exxon Mobil are down more than 30% in the past 12 months after the coronavirus pandemic evaporated oil demand, sending WTI crude and Brent prices spiraling in March of 2020. Oil prices settled at their highest level since February on Tuesday, but Exxon Mobil's stock still lags, noted JPMorgan. "As measured by [percentage of] sell side buy ratings, XOM still has the worst sentiment of the global majors and remains near the low-end of its historical range," said Gresh. Of the 27 analysts that cover Exxon, only nine recommend buying the stock, according to FactSet. Fifteen analysts have a hold rating and three have a sell rating. A main attractive benefit for Exxon is its dividend, with a yield that currently sits at nearly 8%. During the pandemic, many energy companies were under severe pressure to cut their dividends as their excess cash depleted. While many companies succumbed to this pressure, Exxon Mobil did not cut its payout. But Exxon "was clearly living on the razor's edge, with gross debt approaching its $70B max threshold and the prospect of 'running out of excess cash' that it was willing to use to fund the dividend from the balance sheet," said Gresh. "While XOM is not entirely out of the woods, the company's aggressive actions on capex/opex, combined with a recovery in Downstream and Chemicals markets, should now allow XOM to cover its dividend in the low-$50s Brent in 2021+, down from mid-$70s Brent in 2020," added Gresh. JPMorgan upped its December 2021 price target to $56 per share from $50 per share on Exxon. — with reporting from CNBC's Michael Bloom.
A vehicle passes an Exxon Mobil Corp. gas station in Arlington, Virginia, U.S., on Wednesday, April 29, 2020.
Andrew Harrer | Bloomberg | Getty Images
Wall Street is turning positive on Exxon Mobil with JPMorgan becoming the second major bank to upgrade the stock this week.