Exxon’s market capitalization rose above that of Tesla for the first time in two years as investors’ appetite for stable returns in energy stocks prevailed over their attachment to the tech and EV sectors.
Bloomberg reports that since the start of the year the shares of the U.S. oil supermajor have gained 75 percent, suggesting Exxon might record its best annual stock performance in its history. In the meantime, Tesla’s stock has slumped by about 60 percent and is about to book its worst annual performance.
Energy stocks as a whole were the best performers on the stock market this year as oil and gas prices soared on tighter supply, stronger demand, and the disruption of supply that Russia’s invasion of Ukraine caused.
In addition to higher energy commodity prices, energy companies have become appealing because they still have relatively low valuations compared to other sectors. On top of that, the financial performance outlook is quite bright, again because of the imbalance of supply and demand, plus the low likelihood of major supply increases as companies prioritize shareholder returns.
“The bottom line here is that when you think about the earnings of the S&P 500 as a whole, even with muted expectations for earnings next year, energy is going to represent 9% of the index's earnings and it's only 5% of the weighting in the S&P 500,” the senior managing director of Evercore ISI, Julian Emanuel, told Yahoo Finance Live this week.
For Tesla and other EV makers, meanwhile, it has not been such a good year. With the costs of making an EV on the rise, Tesla and other carmakers have had to raise prices and this has not exactly stimulated greater demand. The gloomy economic outlook also does not suggest a greater appetite for EVs or any other big purchases in the near future.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com