Shell stock price target raised to $82 at TD Cowen

On Wednesday, TD Cowen updated its coverage on Shell Plc (NYSE:SHEL), maintaining a Buy rating while slightly increasing the price target to $82 from the previous $81. The transition of primary coverage from Menno Hulshof to Jason Gabelman was announced, with Gabelman endorsing the bullish stance on the energy company. According to InvestingPro data, Shell, with its $217 billion market cap, appears undervalued based on comprehensive Fair Value analysis.

Gabelman’s valuation of Shell is based on a net present value (NPV) of free cash flow (FCF) up to the year 2030, considering that year as a mid-cycle terminal point. The pricing strategy includes current strip pricing extended to 2025, followed by a $65 Brent oil price assumption for the subsequent years. InvestingPro analysis shows Shell maintains a GOOD financial health score, operating with moderate debt levels and consistent dividend payments for 21 consecutive years.

According to the analysis, Shell is currently trading at 4.5 times its enterprise value to EBITDA (EV/EBITDA) ratio, which is a 0.5x increase over its historical average. The company’s average free cash flow yield for the years 2025 to 2027 is projected to be 8%, aligning with historical levels.

The slight increase in the price target reflects a positive outlook on Shell’s financial health and its ability to generate value for shareholders. The assessment by TD Cowen suggests confidence in the company’s performance and stability in the coming years.

In other recent news, Shell Offshore Inc. and Shell Pipeline Company have agreed to purchase an additional 15.96% working interest in the Ursa platform from ConocoPhillips (NYSE:COP) Company, increasing Shell’s stake to a maximum of 61.35%. This acquisition is expected to enhance Shell’s free cash flow and aligns with its strategy to optimize its upstream assets. Additionally, Shell released energy scenarios projecting a significant rise in global demand for liquefied natural gas (LNG), with potential growth reaching 550 million tonnes per year by the end of the decade. In another development, Shell has secured 60 LNG cargoes for Egypt’s needs in 2025, though the financial terms remain undisclosed.

Shell also announced its exit from the Atlantic Shores offshore wind farm project in the US, resulting in a nearly $1 billion write-off. This decision was influenced by the project’s misalignment with Shell’s expected returns. Furthermore, Shell and its South African partner, Thebe Investment Corp., are nearing a resolution in a valuation dispute, potentially leading to the sale of Shell’s local downstream assets for up to $1 billion. This resolution could result in a significant gain for Thebe, who initially valued its stake at $200 million.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.