HSBC is no longer bullish on Royal Dutch Shell (LON:RDSA), arguing that the oil major’s merger with BG Group looks ‘increasingly discounted’, following the shares’ outperformance, Proactive Investors reports. The comments follow the Anglo-Dutch group’s third-quarter results earlier this month.
Shell’s share price is outperforming the broader market in today’s session, tracking oil prices higher. As of 13:34 GMT, the shares were changing hands 0.77 percent higher at 2,349.00p, as compared with a 0.32-percent gain in the benchmark FTSE 100 index. The group’s shares have added more than 16 percent to their value over the past year, and are up by nearly five percent in the year-to-date.
HSBC no longer bullish on Shell
HSBC lowered its stance on Shell from ‘buy’ to ‘hold’ today, while keeping its price target on the shares at 2,600p, pointing to the company’s acquisition of BG Group, which it reckons looks ‘increasingly discounted’ following the stock’s 11-percent outperformance versus its peers in the year-to-date.
“In addition, we remain unconvinced of Shell’s competitive advantages vs the peer group in the longer term,” the analysts pointed out, as quoted by Proactive Investors. “Shell looks more dependent than most on higher crude prices to allow the scale of share buybacks over the next several years to shrink the equity base – and hence the dividend burden – back to more sector-typical levels.”
The broker further noted that the Anglo-Dutch energy major needed to provide more clarity on the long-term outlook for upstream growth in its upcoming strategy day. The company is scheduled to hold a Management Day in London on November 28 and in New York the following day.
Other analysts on Shell
Both JPMorgan Chase & Co and Barclays reaffirmed the Anglo-Dutch oil major as an ‘overweight’ this month, valuing the shares at 2,650p and 2,850p, respectively. According to MarketBeat, Shell currently has a consensus ‘buy’ rating and an average price target of 2,589p.