Shell Shares Downgraded as Analyst Prefers This Oil Stock Instead

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.” 

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.