Shell Q1 earnings preview – stock price at 20-year highs sparks valuation concerns

[MongiIG]

Can the recently dethroned Britain’s most valuable company regain its crown?

Source: Getty Images

 

Shares Commodities Shell plc Valuation Price Day trading

Written by: Chris Beauchamp | Chief Market Analyst, London

 

Publication date: Monday 29 April 2024 14:21

Shell Q1 earnings preview – stock price at 20-year highs sparks valuation concerns

Shell shareholders are anxiously counting down to the oil supermajor's first-quarter (Q1) 2024 earnings release on May 2, with a cloud of valuation concerns hanging over the company. Despite its share price trading near record highs, giving Shell a whopping £185.1 billion market capitalization, the firm was recently dethroned as Britain's most valuable company by pharmaceutical giant AstraZeneca.

That valuation disconnect has drawn scrutiny from both former and current Shell leadership. Ex-CEO Ben van Beurden bluntly stated earlier this month that he views the divergence in valuations between Shell and its US counterparts as a "major issue," going so far as to deem the oil titan "massively undervalued." His successor Wael Sawan echoed those sentiments, warning that if efforts to close the valuation gap fail, "we have to look at all options."

Beyond the overarching valuation concerns, Shell investors will also be keen to hear the company's projections for oil prices over the remainder of 2024. Crude prices have sagged recently, with Brent crude briefly dipping below $90 per barrel earlier this month after a prolonged rally.

Shell slightly increased its overall production guidance in a recent trading update, but provided an unusually wide forecast range for its Renewables and Energy Solutions segment of a $100 million loss to a $500 million gain for Q1.

As 2 May draws closer, the valuation quandary remains front and centre for Shell. Its earnings report and executive commentary could prove pivotal in determining if the market's assessment lines up with that of leadership's "massively undervalued" claims.

Analyst ratings for Shell

LSEG Refinitiv data shows a consensus analyst rating of ‘buy’ for Shell with 4 strong buy, 10 buy and 6 hold – and a mean of estimates suggesting a long-term price target of 3,343 pence for the share, roughly 15% higher than the current price (as of 29 April 2024).

Source: LSEG Refinitiv

Technical outlook on the Shell share price

The Shell share price, up over 13% year-to-date, remains on an upward trajectory and trades close to its current April 20-year high at 2,952 pence.

Shell Daily Candlestick Chart

Source: TradingView

If overcome, the minor psychological 3,000p mark will be in sight.

Medium-term upside pressure will be maintained while the March-to-April uptrend line at 2,824.5p remains intact. More importantly, provided the October 2023 high and mid-April intraday low at 2,801p to 2,755p underpin, the medium-term uptrend will remain technically valid.

A rise above the 3,000p mark could engage the 3,300p region.

 

 

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.