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Investing.com - ATB Capital Markets upgraded SLB (NYSE:SLB) from Sector Perform to Outperform and set a price target of $43.00. According to InvestingPro data, the stock appears undervalued, with analysts setting targets ranging from $38 to $63, and maintaining a strong "Buy" consensus rating of 1.57.
The upgrade comes as SLB has pre-announced its Q2/25 results, reducing the likelihood of negative surprises despite ongoing risks of further cuts in Saudi activity. ATB Capital Markets believes SLB’s current valuation adequately reflects these risks.
The research firm expects the ChampionX merger to be completed prior to Q2/25 results, with SLB likely providing Q3/25 guidance that incorporates ChampionX and raises 2025 EBITDA estimates. Despite issuing 145 million shares to finance the deal, SLB has already repurchased 40% of this new issuance through its Accelerated Share Repurchase program in the first half of 2025.
ATB Capital Markets projects SLB will generate 9% and 10% free cash flow yield on market capitalization for 2025 and 2026, respectively, enabling aggressive share buybacks in 2026 that will further reduce dilution from the merger.
The firm also anticipates SLB will raise its merger synergy target of $400 million over three years and begin reporting its Digital business separately from the D&I segment starting with Q3/25 results, potentially leading to trading multiple appreciation given the Digital business’s growth rates and margins comparable to high-multiple software companies.
In other recent news, SLB has been at the forefront of several significant developments. Jefferies has adjusted its price target for SLB to $53, maintaining a Buy rating as the company prepares to release its second-quarter earnings. The firm expects SLB to report an EBITDA of approximately $2.02 billion and revenue around $8.5 billion, indicating stable performance despite challenging market conditions. JPMorgan also reiterated its overweight rating on SLB, noting a slight decrease in expected EBITDA due to an "unfavorable activity mix."
Additionally, SLB has launched Electris™, a new portfolio of digitally enabled electric well completions technologies aimed at enhancing production and reducing costs. This innovation has already seen over 100 installations across five countries, including a notable application in Norway. Furthermore, SLB has secured a major EPCI contract for the Ginger project offshore Trinidad and Tobago, awarded by bp to its OneSubsea joint venture and Subsea7. This project is part of a global framework agreement with bp and represents a significant milestone for SLB’s subsea operations. UBS continues to see potential in SLB’s digital business, maintaining its Buy rating and a $44 price target, highlighting the anticipated impact of the company’s digital operations on its future growth.
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