Jan 18, 2023
Sales of electric vehicles have been booming in the U.S.
As people become more aware of the impact of burning fossil fuels on the environment, many states — including New York and California — are planning to phase out gas and diesel-powered cars.
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But not Wyoming. A group of the state’s lawmakers proposed legislation that would end the sale of new EVs in Wyoming by 2035.
“Wyoming's vast stretches of highway, coupled with a lack of electric vehicle charging infrastructure, make the widespread use of electric vehicles impracticable for the state,” the bill reads.
“The expansion of electric vehicle charging stations in Wyoming and throughout the country necessary to support more electric vehicles will require massive amounts of new power generation in order to sustain the misadventure of electric vehicles.”
Moreover, the proposed legislation points out that the oil and gas industry has “created countless jobs” in Wyoming and phasing out new EV sales will “ensure the stability” of the industry.
To be sure, despite the increasing focus on ESG investing, traditional energy is far from dead. The Energy Select Sector SPDR Fund (XLE) — which provides exposure to oil and gas companies — is actually up 39% in the last 12 months, in stark contrast to the S&P 500’s double-digit decline in the same period.
Moreover, Wall Street sees further upside in quite a few companies engaged in hydrocarbon exploration. Here’s a look at three of them.
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More: Is buying a Tesla worth it?
Shell
Headquartered in London, Shell (NYSE:SHEL) is a multinational energy giant with operations in more than 70 countries. It produces around 3.2 barrels of oil equivalent per day, has an interest in 10 refineries, and sold 64.2 million tons of liquefied natural gas in 2021.
It’s a staple for global investors, too. Shell is listed on the London Stock Exchange, Euronext Amsterdam, and the New York Stock Exchange.
The company’s NYSE-listed shares are up 17% over the past year.
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Piper Sandler analyst Ryan Todd sees an opportunity in the oil and gas supermajor. The analyst has an ‘overweight’ rating on Shell and a price target of $70.
Considering that Shell trades at around $59.50 per share today, Todd’s new price target implies a potential upside of 18%.
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Chevron
Chevron (NYSE:CVX) is another oil and gas supermajor that’s benefiting from the commodity boom.
For Q3, the company reported earnings of $11.2 billion, which represented an 84% increase from the same period last year. Sales and other operating revenues totaled $64 billion for the quarter, up 49% year over year.
Last January, Chevron’s board approved a 6% increase to the quarterly dividend rate to $1.42 per share. That gives the company an annual dividend yield of 3.1%.
The stock has enjoyed a nice rally too, climbing 40% in the last 12 months.
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Earlier this month, Barclays analyst Jeanine Wai reiterated an ‘overweight’ rating on Chevron while raising the price target from $196 to $212. That implies a potential upside of 17% from the current levels.
Exxon Mobil
Commanding a market cap of over $460 billion, Exxon Mobil (NYSE:XOM) is bigger than Shell and Chevron.
The company also boasts the strongest stock price performance among the three — Exxon shares are up 55% over the past year.
It’s not hard to see why investors like the stock: the oil-producing giant gushes profits and cash flow in this commodity price environment. In the first nine months of 2022, Exxon earned $43.0 billion in profits, a huge increase from the $14.2 billion in the year-ago period. Free cash flow totaled $49.8 billion for the first nine months, compared to $22.9 billion in the same period last year.
Solid financials allow the company to return cash to investors. Exxon pays quarterly dividends of 91 cents per share, translating to an annual yield of 3.2%.
Jefferies analyst Lloyd Byrne has a ‘buy’ rating on Exxon and a price target of $133 — around 17% above where the stock sits today.
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Jing is an investment reporter for MoneyWise. He is an avid advocate of investing for passive income. Despite the ups and downs he’s been through with the markets, Jing believes that you can generate a steadily increasing income stream by investing in high quality companies.
