Shell Share Price (RDSB) is 38.7% Undervalued. Is it a Buy?

The Shell share price crashed on Thursday after it emerged that Russia, Saudi Arabia, and the United Arab Emirates (UAE) had reached an agreement on production. Other oil supermajors like BP, ExxonMobil, and Chevron also declined. The RDSA and RDSB shares will be in focus today after the company starts selling power from a battery plant in the UK.

Shell news. The Royal Dutch Shell share price will be in focus today after it crashed by more than 2% on Thursday, becoming one of the worst performers in the FTSE 100 index. The stock will be in the spotlight as the company switches on its giant battery in Wiltshire in the UK. The battery will produce 100 megawatts, which can be used to power more than 10,000 homes every day bedore it needs recharging. In a statement, David Wells said:

“Flexible storage and supply systems such as Minety have an essential role in balancing supply and demand. We fully support the UK’s target of achieving a net-zero emissions society by 2050. Projects like this will enable that transition.”

Shell and other fossil fuel companies have been under pressure in the past few years. Activists, banks, and investors have all pressed them to change their ways and reduce their emissions. The situation worsened for Shell after a judge ordered it to cut emissions by 2030. The company has already put measures in place to reduce these emissions. This week, the company unveiled a major carbon capture project in Alberta. It also joined a clean hydrogen project in Norway.

Fundamentally, the Shell share price seems attractive considering that oil prices have surged and the company has exited some of its unprofitable businesses. The company is also pledging to increase its dividends and buybacks. Another catalyst is that the share price is undervalued. A DCF valuation shows that the stock is about 38.7% undervalued as shown below.

Shell share price forecast

On Wednesday, I warned that the RDSA and RDSB share prices would likely drop since it had formed a rising wedge pattern. This prediction was accurate as the stock declined sharply on Thursday. As it did this, it moved below the lower line of the wedge. At the same time, the 25-day and 50-day moving averages made a bearish crossover pattern. 

Therefore, while the stock will have a relief rally, the overall trend is bearish in the near term. This will see it drop to the next support at 1,300p. On the other hand, a rise above 1,450p will invalidate this price action.

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RDSB shares chart

Shell Share Price

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