Shell Share Price is Up 40% YTD. Here’s Why it’s a Bargain

Shell share price has done modestly well in the past few weeks as the recovery gains steam. The stock rose to a high of 2,321p, which is substantially higher than July’s low of 1,908p. It has jumped by over 40% this year as investors cheer the trends in the natural gas industry. 

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Is Shell a good buy?

Shell is one of the biggest oil and gas companies in the world with a market cap of over $193 billion. This makes it the 50th biggest company in the world by market cap. It is also the fourth-biggest oil and gas company in the world after Saudi Aramco, ExxonMobil, and Chevron. Most importantly, Shell is one of the biggest natural gas producers in the world. 

Therefore, Shell’s business has done well in 2021 as investors react to the soaring oil and gas prices. For example, natural gas has jumped by more than 125% this year while Brent has jumped by 20%. Therefore, the company has seen its revenue and profitability jump to the highest level in decades. 

In the most recent quarter, the firm said that its adjusted earnings rose to over $11.4 billion while its adjusted EBITDA rose to over $23 billion. Notably, its integrated gas business generated an EBITDA of over $6.5 billion. 

Analysts believe that the company will continue doing well in the coming months. For one, oil and gas prices have remained at an elevated level. Still, a key risk for the firm is that some European countries are considering a windfall tax for oil and banks. Such a tax will have an impact on the stock.

In addition, some analysts believe that the share price is a bargain. For example, in a recent note, Barrons said that Shell could boost its dividend since it maintains a conservative payout ratio of just 20%. Similarly, analysts at Morgan Stanley said that Shell has an operating cash flow of 30% to 40% higher than that of Chevron. Yet, it pays a much lower payout.

Shell share price forecast

The daily chart shows that Shell share price has been in a strong bullish trend lately. The stock has formed an ascending channel that is shown in green. At the same time, it moved above the 25-day and 50-day moving averages while the MACD has moved above the neutral level. It has also moved above the important resistance point at 2,240p, which was the highest point on June 29.

Therefore, the stock will likely continue rising as bulls target the next key resistance level at 2,500p. A move below 2,240p will invalidate the bullish view.

Shell share price