Barclays remains bullish on Royal Dutch Shell (LON:RDSA), even though the oil major had a difficult 2016. The analysts expect that the changes the group has made will start delivering, potentially proving that the shares are ‘meaningfully undervalued’.
Shell’s share price slipped into the red in the previous session, having inched 0.17 percent lower to 2,112.50p, slightly underperforming the broader market, with the benchmark FTSE 100 index shedding 51.47 percent to end the session 0.69 percent lower at 7,378.34. The group’s shares have gained more than 24 percent over the past year, but have given up just under six percent in the year-to-date.
Barclays reiterated its ‘overweight’ recommendation on Shell yesterday, while trimming its price target on the shares from 2,800p to 2,750p, following the group’s annual report. Citywire quoted the bank’s analyst Lydia Rainforth as saying that the company had started 2017 in a “vastly different position” to a year ago, with the BG integration complete and the combined group providing “a competitive base from which it should be able to reset and simplify the business”.
“Nonetheless, it is clear Shell’s work is not over,” she pointed out. “The company lost money in its consolidated upstream operations for the second consecutive year and its unit production costs are still materially higher than in 2005 when Brent last averaged in the $50s.”
The comments come after Shell updated investors on its full-year performance last month, posting a hefty drop in earnings. The company, however, also revealed improved cash flow and lower net debt in the wake of the acquisition of BG Group.
Other analysts also remain bullish on Shell, with HSBC having reiterated its ‘buy’ rating on the shares last week, with a price target of 2,600p. Credit Suisse meanwhile continues to see the Anglo-Dutch oil major as a ‘buy,’ valuing the stock at 2,450p.