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On Monday, Morgan Stanley (NYSE:MS) reaffirmed its confidence in Shell PLC (LON:SHEL:LN), maintaining an Overweight rating and a price target of GBP27.27. The firm highlighted Shell’s resilience amid the challenging macroeconomic environment. According to Morgan Stanley, Shell’s strategic alignment with a lower price environment positions the company advantageously.
Shell’s management underscored the significance of a solid financial foundation during their first-quarter 2025 earnings call. They emphasized that the company’s deliberate positioning over the past years has left it well-prepared for current market conditions. "At times like this, the importance of a strong balance sheet and a robust financial framework are critical, and we have consciously positioned the company over the last few years, leaving us well-placed," management stated.
Since mid-2023, Shell has adopted a conservative capital allocation strategy. This approach has involved scaling back on expenses, maintaining a streamlined capital expenditure program, reducing debt levels, and focusing on share buybacks. These measures have resulted in Shell achieving the lowest gearing level among its European counterparts, reported at approximately 17% including leases—and when taking into account hybrid bonds for its peers—at the end of 2024.
Morgan Stanley’s reiteration of the Overweight rating suggests a positive outlook on Shell’s stock, reflecting the company’s strategic financial management and its capability to navigate through periods of economic uncertainty. The price target of GBP27.27 remains unchanged, indicating the firm’s steady confidence in the value and performance of Shell’s shares on the London Stock Exchange (LON:LSEG).
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