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Shell: Analysts’ Recommendations and Target Price


Oct. 27 2017, Updated 10:33 a.m. ET

Analysts’ ratings for Shell

In this series, we reviewed Royal Dutch Shell’s (RDS.A) 3Q17 estimates, segment-wise prospects, stock returns, moving averages, and stock price forecast before of its earnings on November 2, 2017. Now, we’ll discuss analysts’ ratings for Shell.

Shell is rated by 11 Wall Street analysts—ten (or 91%) analysts assigned “buy” or “strong buy” ratings, one assigned a “hold,” and no analysts assigned “sell” or “strong sell” ratings on the stock.

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Who raised the target prices for Shell stock?

Several Wall Street analysts raised their target prices for Shell stock. Recently, Jefferies raised Shell’s target price to $67.9 per share. Scotia Howard Weil increased the target price for Shell from $54 per share to $58 per share. Goldman Sachs raised Shell’s target price from $66 per share to $69 per share. Shell’s mean target price of $66 per share indicates an 8% gain from the current level.

Higher “buy” ratings

Shell plans to reduce its debt by pulling its four levers (divestment, capex cut, cost reduction, and new projects). It appears that Shell has started yielding results from this strategy. Shell has decreased its debt from the highs witnessed in 3Q16. Also, 1H17 has been a great period for Shell in terms of cash flows—compared to 1H16.

Shell expects to continue this strategy until 2020 so that it can remain profitable even at lower oil prices. On debt reduction and liquidity improvement, Shell’s CEO Ben Van Beurden stated in the 2Q17 earnings transcript, “These are great measures of the progress we are making. They show that our strategy of delivering a world-class investment case is working. They show that we are transforming Shell through the re-shaping of the portfolio as well as through structural changes in our culture and ways of working.”

On cost reduction, he said, “We have achieved these reductions by cost-cutting but also by changing our company’s culture, by changing how we work, and by adopting what we call a “lower forever’’ mindset.”

Analysts’ ratings for Shell’s peers

Statoil (STO), Total (TOT), and YPF (YPF) have been recommended as a “buy” by 20%, 17%, and 86% of the analysts, respectively. ExxonMobil (XOM), BP (BP), and Chevron (CVX) have been rated as a “buy” by 31%, 50%, and 64% of the analysts, respectively.


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