Barclays has named Royal Dutch Shell (LON:RDSA) as a ‘top pick’ in the sector, with a 3,250p price target, WebFG News has reported. The move follows the Anglo-Dutch oil major’s results at the end of last month when the company posted forecast-beating profits.
Shell’s share price has climbed higher in London in today’s session, having gained 0.54 percent to 2,427.00p as of 13:39 GMT. The stock is marginally underperforming the broader UK market, with the benchmark FTSE 100 index currently standing 0.72 percent higher at 7,122.09 points. The group’s shares have added more than eight percent to their value over the past year, as compared with less than a one-percent gain in the Footsie.
Barclays sees Shell as ‘top pick’
WebFG News reported today that Shell had overtaken FTSE 100 peer BP (LON:BP) as the ‘top pick’ n the sector for Barclays, which feels the oil giant still needs to improve free cash flow (FCF) growth to boost shareholders returns. The analysts argue that better cash returns for shareholders, ‘almost regardless of the oil price,’ would make the Anglo-Dutch group a true world-class investment case on a multi-year basis.
“There continues to be debate in the market about the group's level of spending, but for this period in the company's life-cycle we see it as appropriate, if not a little too high,” the broker pointed out.
Analysts weigh in on share price
WebFG News further quoted the analysts as saying that Shell’s share price, with a near six-percent dividend yield and a further three percent of market cap set to be returned through share buybacks each year, “simply does not reflect the underlying free cashflow potential” and offered “a clear value opportunity,” with the capital markets day in June a potential key catalyst.