Exxon Mobil Corporation (XOM): A Bull Case Theory 

We came across a bullish thesis on Exxon Mobil Corporation on Phaetrix Investing’s Substack by /Phaetrix. In this article, we will summarize the bulls’ thesis on XOM. Exxon Mobil Corporation’s share was trading at $134.84 as of January 26th. XOM’s trailing and forward P/E were 19.60 and 18.66  respectively according to Yahoo Finance.

Exxon Mobil Corporation engages in the exploration and production of crude oil and natural gas in the United States, Guyana, Canada, the United Kingdom, Singapore, France, and internationally. XOM is operating more efficiently and with greater capital discipline than it has in decades, but its stock is priced as if that discipline has permanently tamed the oil cycle. XOM remains a best-in-class integrated oil major, with upstream production driving cash generation and refining and chemicals acting as partial stabilizers.

The true product is free cash flow, which enables Exxon to fund capex internally, maintain a durable dividend, and execute large buybacks without balance-sheet stress. When oil markets are favorable, this cash return engine looks formidable; when conditions turn, free cash flow compresses quickly because commodity pricing remains outside management’s control. The balance sheet is no longer the concern, and that strength has allowed the market to assign a premium valuation, treating Exxon less like a cyclical and more like a quality compounder.

That re-rating itself is the risk. A meaningful portion of recent shareholder returns has come from multiple expansion rather than underlying business growth, meaning future returns depend more on calm commodity markets than on operational improvement alone. Buybacks provide support but become less accretive when executed at elevated multiples, especially if oil prices soften and cash generation tightens simultaneously. The marginal buyer today is dividend- and quality-focused capital, which can rotate quickly if sentiment shifts.

Over a 3–5 year horizon, mid-cycle free cash flow growth is likely modest, and upside appears capped unless oil remains cooperative for longer than history suggests. Exxon is a strong long-term business and a reliable cash distributor, but at current levels it is priced for stability rather than resilience. At a meaningfully cheaper valuation, with a higher yield or lower free-cash-flow multiple, XOM would become a far more attractive long-term buy for investors willing to underwrite cycle risk.

Previously, we covered a bullish thesis on Occidental Petroleum Corporation (OXY) by Magnus Ofstad in May 2025, which highlighted the company’s low-cost Permian Basin production, diversified operations, and long-term potential in carbon capture despite investor skepticism and execution risks. OXY’s stock price has appreciated by 2.04% since our coverage. Phaetrix shares a similar bullish view on Exxon Mobil Corporation (XOM) but emphasizes capital discipline, free cash flow generation, and shareholder returns as the main drivers of long-term value.

Exxon Mobil Corporation is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 93 hedge fund portfolios held XOM at the end of the third quarter which was 88 in the previous quarter. While we acknowledge the risk and potential of XOM as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than XOM and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.