Despite the recent rise in oil prices resulting from the conflict in the Middle East, Shell shares were downgraded to Market Perform from Outperform by Bernstein in a recent note.
The bank told investors last week that it has shifted its top pick in the European oil and gas sector to TotalEnergies. Bernstein set a 3,100p price target for Shell.
Explaining the move, Bernstein told investors that Shell remains a “core holding” but offers “more muted valuation upside potential.”
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The analysts highlighted TotalEnergies’ stronger growth outlook, stating it has production growth that is among the strongest in the group, along with a low unit production cost and a higher distribution yield than peers.
The downgrade comes as Shell shares have gained around 8% so far this year, though the stock has slipped 2.6% in the past three months and currently trades near 2,683p.
TotalEnergies, meanwhile, is up over 3% year-to-date, despite a recent pullback of almost 7% over the three months. The French energy group remains down more than 11% over the last 12 months.
Bernstein’s preference for TotalEnergies suggests the firm sees better risk-reward potential in stocks with higher yield and cost efficiency, even amid broader market volatility in the energy space.
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