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Electric vehicles have become popular in recent years. But electric vehicles could take a hit based on what’s happening in Switzerland.
According to a December Telegraph report, the country is considering contingency measures in the event of a power shortage this winter.
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Switzerland, the best country in the world according to a recent analysis by US News & World Report, could shorten shop opening hours, turn down thermostats in buildings and limit private use of electric cars to “absolutely necessary travel”.
But just the suggestion to curb the use of EVs ignited the country’s auto lobby. The director of the auto-schweiz group of importers, Andreas Burgener, called this “a disservice to electromobility”.
“Customers who buy or order a vehicle now will think twice about switching back to petrol or diesel,” Burgener said in an interview with Reuters.
The proposed measures have not been signed into law, they serve as a reminder that electricity doesn’t magically appear in every wall outlet and that electric vehicles don’t run on fairy dust.
And this potential setback for EVs serves as a reminder that traditional energy isn’t dead. The Energy Select Sector SPDR Fund (XLE), which provides exposure to oil and gas companies, is up 30% over the past year.
In addition, Wall Street sees further upside in several companies engaged in hydrocarbon exploration. Here’s a look at three of them.
Shell
Headquartered in London, Shell (NYSE: SHEL) is a multinational energy giant with operations in more than 70 countries. It produces about 3.2 barrels of oil equivalent per day, has stakes in 10 refineries and sold 64.2 million tons of liquefied natural gas in 2021.
It is also a staple for global investors. Shell is listed on the London Stock Exchange, Euronext Amsterdam and the New York Stock Exchange.
The company’s shares listed on the NYSE are up 10% over the past year.
Piper Sandler analyst Ryan Todd sees opportunity in the oil and gas supermajor. The analyst has an “overweight” rating on Shell and a $70 price target.
Considering that Shell is trading at around $61.50 a share today, Todd’s price target implies 14% upside potential.
Chevrons
Chevron (NYSE:CVX) is another major oil and gas major benefiting from the commodity boom.
In 2022, the company reported earnings of $35.5 billion, representing a 127% increase over 2021. Sales and other operating revenues totaled $235.7 billion for 2022, an increase of 51% on an annual basis.
Last month, Chevron’s board of directors approved a 6% increase in its quarterly dividend rate to $1.51 per share. This gives the company an annual dividend yield of 3.5%.
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The stock has also enjoyed a nice rally, up 25% over the past year.
In January, Barclays analyst Jeanine Wai reiterated an “overweight” rating on Chevron while raising her price target from $196 to $212. That implies a potential 24% upside from current levels.
ExxonMobile
With a market cap of approximately $480 billion, Exxon Mobil (NYSE:XOM) is bigger than Shell and Chevron.
The company also boasts the best share price performance of the three: Exxon shares are up 48% over the past year.
It’s not hard to see why investors like the stock: The giant oil producer is gushing profits and cash flows in this commodity price environment. In 2022, Exxon earned $55.7 billion in profit, a huge increase from $23.0 billion in 2021. Free cash flow was $62.1 billion for the year, up from $37.9 billion billion in 2021.
Strong financials allow the company to return money to investors. Exxon pays quarterly dividends of 91 cents per share, which translates into an annual yield of 3.1%.
Bank of America analyst Doug Leggate has a “buy” rating on Exxon and a price target of $140, about 19% higher than where the stock is today.
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This article provides information only and should not be construed as advice. Comes without warranty of any kind.
