Is the Shell share price poised for take-off in 2024?

The Shell share price has fallen so far in 2024. However, having just released results, could the shares be set to rise? This Fool takes a look.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Olaf Kraak via Shell plc

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The Shell (LSE: SHEL) share price has delivered investors market-beating returns over the last 12 months. While the FTSE 100 is down 2.5%, Shell shares have climbed over 6%.

That being said, so far in 2024 the stock has dropped almost 4%. However, given the company’s recently announced results, could this be set to change over the next year? Let’s take a closer look.

Excellent results

Yesterday (1 February), Shell released its 2023 Q4 and full-year results. Its full-year earnings came in at $28bn, 29% lower than the prior year when it posted record earnings of just under $40bn. However, this is to be expected given the spike in oil prices after the crisis in Ukraine began in 2022.

A stat that caught my eye was Shell’s earnings in Q4 specifically, which beat analyst expectations. Analysts had anticipated the oil giant’s earnings to be around the $6bn mark, but they actually topped $7bn.

The company attributed its results partly to robust margins from liquefied natural gas trading, which offset lower performance in oil products trading.

Shell also disclosed a 4% uptick in dividends for Q4. As a keen passive income investor, I am always on the lookout for encouraging stats like this.  

Additionally, the company unveiled plans for a $3.5bn share buyback programme for the upcoming three months. This initiative builds on the previously announced $3.5bn share buybacks from November last year, which have now been completed. It’s always a good sign when a company buys back its shares. By reducing the number of shares out there, dividends are shared by fewer investors, and hence yields are pushed up.

My thoughts on valuation

Looking at Shell’s price-to-earnings (P/E) ratio, I also see value. Currently trading at just over seven times earnings, the stock is below my ‘value’ barometer of 10. For context, the FTSE 100 average P/E ratio is currently hovering around 14.

In addition to this, Shell’s primary competitors, the US oil behemoths Chevron and ExxonMobil, carry significantly higher P/E ratios, standing at 10.2 and 11, respectively. This signifies to me that the current Shell share price could be undervalued.

Uncertainty ahead

One of my primary concerns with oil giants like Shell is that they essentially need to reinvent themselves in the next few decades. With the world moving towards renewable energy, Shell must find new ways to generate profit.

That said, demand is expected to stay strong in the short term. In fact, according to the International Energy Administration, natural gas demand is expected to increase by five times this year.

The verdict

Overall, I like the look of Shell shares for my portfolio. Given the current low valuation and encouraging results, I think the shares could pick up this year. While some uncertainty remains over its transition to green energy, now could be a great time to buy for long-term growth. If I had some spare cash I’d be investing today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Dylan Hood has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »