Shell’s Shares Move Negative on 1 Year – Analyst Downgrades, Raises Target

Shell's share price (LON:SHEL) is under a bit of pressure today, down 1.35% on the back of falling oil prices, and a downgrade from HSBC to “Hold” from “Buy,” has seen SHEL move red over the past 12 months (down 0.74%).

HSBC actually increased their price target slightly to 2,950p from the previous 2,900p, yet the downgrade reflects concerns that normalizing conditions in the liquefied natural gas (LNG) and oil trading markets will disproportionately impact Shell's profitability compared to its industry peers.

The recent price action highlights the stock's sensitivity to market volatility and sector-specific pressures. HSBC's analysis suggests that this volatility may persist, driven by factors beyond Shell's immediate control.

A key concern highlighted by HSBC is the potential for a significant increase in Shell's net debt. The firm projects that Shell's debt could surge by nearly 50% to approximately $60 billion over the next few years. This increase is attributed to the expectation that shareholder distributions will remain unfunded organically until the end of the decade, placing a strain on the company's financial health.

HSBC's analysts also questioned whether Shell's valuation premium compared to TotalEnergies (TTE) is still warranted. Shell's normalized P/E ratio of 9.11 is higher than TotalEnergies, while its return on equity stands at 10.8% compared to TTE's 14.8%. This discrepancy raises concerns about Shell's relative efficiency and profitability.

The downgrade comes amidst a period of strategic shifts for Shell. CEO Wael Sawan has been actively seeking to close the valuation gap with U.S. rivals like ExxonMobil and Chevron.

One proposed strategy involves repurchasing up to 40% of the company's shares over the next five years, signaling a shift from growth to value. This focus on returning cash to shareholders through dividends and buybacks reflects investor demands for improved capital allocation.

However, Shell's recent Q2 2025 results, revealed weak revenue and earnings, likely contributing to the stock's slight decline after hitting its peak. The company reported a 32% year-on-year decline in Q2 adjusted earnings, falling to $4.3 billion, primarily due to lower oil and LNG prices.

Despite these challenges, Shell has also demonstrated resilience. The company achieved $800 million in cost reductions in the first half of 2025 and plans to maintain $3.5 billion in quarterly share buybacks.

This latest update from the street is mixed at best. An analyst downgrade, albeit one that comes with a raised price target is indicative of a shift in preference on the sector. Shell's shares have seen friction plenty of times over the past year at the 2,700 region, and remain just below at 2,688 leading into the final minutes of the trading day.