Investing.com -- Wolfe Research downgraded ExxonMobil to Peer Perform from Outperform on Tuesday, ending a five-year run as the broker’s top major oil pick after a sharp rally pushed the stock to levels analysts believe now fully reflect the company’s free cash flow (FCF) trajectory.

Shares of ExxonMobil were trading at $147.68 as of Monday’s close, up 23% year-to-date and 38% over the past twelve months, outpacing both the S&P 500 and the broader energy sector.

Wolfe also removed its $153 price target along with the downgrade.

“XOM’s share performance may have been fueled by external factors. But it has left the shares fairly valued beyond an oil price call, with one eye on exposure to the MidEast. After 5yrs as our top major idea, we see sector-leading FcF growth discounted,” analyst Doug Leggate said.

Wolfe’s rating cut rests primarily on valuation. The firm’s discounted cash flow model uses long-term Brent crude at $70 per barrel and a weighted-average cost of capital of 7%. At long-term $80 per barrel, Wolfe estimates fair value of around $174 per share — roughly where the stock peaked at the height of the Iran war premium.

Part of Exxon’s recent share gains were attributed to factor rotation, with the stock rebounding 24% through February 2026, Leggate noted.

“While the shares are off recent highs, fueled by the Iran war premium, we see XOM fairly valued at strip underlining that the share price outlook from here is more likely as a proxy for sector exposure,” he wrote.

The analyst also flagged ExxonMobil’s Middle East exposure as a secondary concern. Force majeure conditions currently affect roughly 20% of the company’s production, and if disruptions persist through the second quarter, Leggate said they could expose cash flows tied to contracts set to expire beyond the company’s 2030 targets.

Looking further out, the analyst noted that management has acknowledged gaps in its post-2030 plan to sustain 6% annual cash flow growth. With four of eight major Guyana development phases still ahead, he said projected free cash flow growth from those projects appears largely priced in.

"From here the investment case transitions to a commodity call vs the stock specific strategy that led 14% outperformance vs U.S. major peers," he said.