NEW YORK (AP) — An Oppenheimer & Co. analyst downgraded shares of Exxon Mobil Corp. Tuesday, saying he thinks the oil and gas giant's stock will trade in line with the S&P 500 over the next year.
THE OPINION: Analyst Fadel Gheit downgraded the stock to "Perform" from "Outperform" and removed his price target, which had been $100 per share. Exxon Mobil is the world's largest company by market capitalization, valued at about $405 billion, but Gheit said the stock probably won't do better than the broader market for now.
The biggest reason, he wrote, is that the company's cash flow is not sufficient to maintain its large stock repurchase program.
"Even at higher oil and gas prices, Exxon Mobil cannot maintain its $20 billion annual share repurchase program, a key value driver," Gheit wrote. He added that it will be hard for the company to sustain its production without a big acquisition — and it isn't likely it will make one.
Exxon Mobil did not immediately respond to a request for comment.
Gheit said the company has spent more than $200 billion on stock repurchases over the last 10 years, and that spending has been an important factor in the performance of Exxon Mobil's shares.
THE STOCK: Exxon Mobil shares lost 27 cents to $90.50 in afternoon trading. The stock is up 4.3 percent over the last year and has traded between $77.13 and $93.67 in the past 52 weeks.