In the current landscape of the energy sector, where many stocks have struggled, Schlumberger emerges as a compelling opportunity. Despite the sector’s overall downturn and a cautious outlook for 2024, SLB stands out as a bullish pick with strong long-term prospects.
Rahul Ghosh, an equity portfolio specialist at T. Rowe Price, highlights the potential of oil services companies, particularly SLB, over larger oil corporations. These service providers, with their extensive involvement in drilling and analysis, are well-positioned to capitalize on higher oil prices and increased drilling activity. This is especially relevant in the current environment, where oil supply is expected to remain constrained, and geopolitical tensions in the Middle East are driving oil prices higher.
SLB, known for its range of services to the petroleum industry, including well testing, directional drilling, and seismic data processing, is trading at a 12-month forward price-to-earnings ratio of 14.64. This valuation is notably higher than the S&P 500 Energy sector’s average, suggesting a healthy market perception of its growth potential.
Despite a recent dip in its share price, SLB has maintained a year-to-date increase of 1.5%, trading at $52.28 as of December 18. The stock has garnered strong support from analysts, with 27 out of 28 giving it a buy or overweight rating. The average price target stands at $69.68, indicating an upside potential of approximately 33.5%.In conclusion, Schlumberger represents a unique opportunity within the energy sector. Its robust service offerings, coupled with a favorable market valuation and strong analyst backing, make SLB a stock to watch for investors seeking growth in a challenging market. With its potential to outperform amidst sector-wide headwinds, SLB is a stock that could offer both stability and significant returns.
