Where could the Shell share price go in the next 12 months? That’s what the experts think

The sleeve (LSE:SHEL) The share price has been on a slight downward trend over the last six months, falling over 10%. It appears that investors are becoming increasingly concerned about falling oil prices as well as announcements from other industry giants B.P weaker profits. In fact, BP recently announced a possible cut in its planned share buyback program to reallocate capital to reduce debt.

With this in mind, investing in Shell doesn’t seem like a sensible idea at the moment. But looking at the latest results, it seems a very different picture is being painted. In fact, last quarter’s earnings were 3% below the previous year’s figure, but were 12% above analysts’ expectations.

It subsequently maintained dividends and announced that another $3.5 billion in share buybacks would be completed before the end of 2024. At the same time, Shell’s leverage ratio fell from 17% to 15.7%, largely thanks to a $3.1 billion reduction in net debt due to continued free cash flow generation.

It goes without saying that the combination of better-than-expected earnings and a stronger balance sheet is good news for shareholders. But given this development, what do the experts predict for the Shell share price in the next 12 months?

The forecast

The latest analyst forecasts for Shell look very encouraging. While not everyone is convinced, 14 of the 20 institutional experts have rated the oil and gas giant in either the “Buy” or “Outperform” categories. And when you look at the 12-month stock price forecasts, it’s not hard to see why.

A projected return of close to 160% would be great. But it also sounds a bit unrealistic, especially given the predicted double-digit decline in oil prices in 2025. But while this is just one analyst’s opinion, the recent Trump victory in the US election bodes well for Shell. Finally, Trump has promised a significant increase in U.S. oil and gas production, potentially creating a host of new growth opportunities.

Additionally, from a valuation perspective, Shell shares are currently relatively cheaper compared to its peers, with a price-to-earnings (P/E) ratio of just 13.9 compared to BP’s 29. And it’s no secret that buying cheap stocks is a winning strategy for higher returns.

However, it is important to remember that as a commodity-focused company, Shell has no pricing power. And of course, if forecasts of falling oil prices come true, the resulting drop in earnings would drive up Shell’s P/E ratio.

Time to buy?

As tempting as the growth opportunity seems, I personally am in no rush to start buying Shell shares at this time. There are simply too many external uncertainties that can significantly impact the oil giant’s valuation, especially given the ongoing conflicts in the Middle East.

Instead, I invest my capital in other promising investment opportunities.