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UPDATE 2-J.P. Morgan turns positive as Exxon cuts win back Wall St

(Adds details on Exxon share movement; Updates share price)

Jan 13 (Reuters) - J.P. Morgan was the latest major U.S. investment bank to turn positive on Exxon Mobil on Wednesday, just months after its removal from the blue-chip Dow Jones Industrial Average capped a catastrophic year for America’s major oil producers.

The shift to an “overweight” rating by the bank was the first time in seven years that J.P. Morgan had outright recommended investors bet on Exxon, dating back to the drop in oil prices below $100 in mid-2014.

Since 2014, the oil major’s shares have more than halved, while the S&P 500 index has more than doubled.

Morgan Stanley also upgraded the company to “overweight” on Monday, while Goldman Sachs and Wells Fargo both issued positive recommendations last month, a sign of Wall Street’s approval of radical cuts the company has made in spending as well as how much its share price has fallen since last March.

“Improved transparency, cost reduction actions and increased investor pressure could all serve to push Exxon to put up more consistent results,” J.P. Morgan analyst Phil Gresh said in a note.

Gresh is rated a maximum five stars for accuracy by Refinitiv and J.P. Morgan is one of 8 brokerages that rate the stock “buy” or higher, while 15 rate it “hold” and another 4 “sell” or lower.

The oil sector was among the most heavily sold in last year’s coronavirus sell-off, and has struggled to recover since as a wave of bankruptcies, asset writedowns and dividend cuts shook confidence in the sector.

Exxon was briefly overtaken by NextEra Energy Inc, the world’s biggest provider of wind and solar energy, to become the top energy company by market value in the United States.

But global crude prices have now more than doubled from lows a year ago and analysts are beginning to believe that the worst of the bloodletting is over.

Gresh and his colleagues praised Exxon’s promise to limit capital expenditure at $20 billion to $25 billion until 2025 and raised their price target for the stock to $56 from $50.

Goldman Sachs had also cited upside from the oil major’s chemicals business and its operations in Guyana, as well as improved free cash flow, and constructive view on crude.

Exxon’s shares were up 0.9% at $48.32. (Reporting by Arunima Kumar, Arathy S Nair and Aniruddha Ghosh in Bengaluru, Additional reporting by Tapanjana Rudra; Editing by Uttaresh.V and Shounak Dasgupta)

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