Schlumberger (SLB) Stock Forecast for 2024, 2025, 2026. Sell or Buy?

In his latest analytical financial article, Hoya Capital maintains a bullish stance on SLB stock, presenting a well-argued case for its growth potential. With a remarkable track record of 3,077 publications since 2015 and a substantial subscriber base of 34,711, Hoya Capital’s insights are followed and trusted by many. The frequency and consistency of his contributions, coupled with the high popularity and credibility of his viewpoints, reinforce the authoritative nature of his bullish outlook on SLB. This review delves into the reasoning behind his confidence in SLB’s prospects, providing readers with valuable perspectives from a highly regarded financial analyst.

Key Theses of the Review

• Schlumberger offers a compelling value opportunity with strong business performance, low P/E, and forward growth expectations.
• The company's focus on resilient market segments and robust digital growth, combined with the pending ChampionX acquisition, positions SLB well for continued growth.
• SLB has a solid balance sheet, expanding margins, and a robust capital return strategy, enhancing shareholder value.

Key Factors Influencing SLB's Stock Price

SLB's revenue grew by 5% sequentially in Q2 2024, driven by international markets. This consistent performance is crucial for maintaining investor confidence and driving stock price upward.

The acquisition of ChampionX, which holds a leading market share in the chemicals production space, significantly expands SLB's presence and enhances its revenue stream potential over decades, positively impacting future stock price.

With a low net debt to TTM EBITDA ratio of 1.2x and a planned capital return of $3 billion this year, along with $4 billion slated for 2025, SLB is in a strong financial position to sustain dividends and buybacks, boosting shareholder value.

A potential slowdown in the global economy could reduce demand for oilfield services, impacting SLB's stock negatively. However, current favorable conditions in resilient market segments mitigate this risk to some extent.

With a 28% YoY increase in Delfi platform users and a 57% increase in connected assets, SLB’s digital growth supports margin expansion and overall business efficiency, positively influencing its stock price.

SLB’s stock is highly sensitive to oil price fluctuations and sector cyclicality. Recent drops by 25% over the past 12 months underline this volatility, making it a significant factor to monitor.

Commentary

Schlumberger (SLB) is poised for strong growth, propelled by its robust digital advancements and anticipated acquisition of ChampionX. A significant 28% YoY increase in Delfi platform users and a 57% rise in connected assets signal a substantial uptick in business efficiency and profit margins. Additionally, the ChampionX deal broadens SLB's market scope within the chemicals production sector, setting the stage for long-term revenue gains. These advancements collectively ensure SLB remains an attractive investment opportunity.

SLB's solid financial footing, underscored by a low net debt to EBITDA ratio of 1.2x and a strategic $3 billion capital return initiative, further amplifies investor confidence. However, potential headwinds such as the fluctuating global economy and inherent oil price volatility might temper short-term gains. Nonetheless, the average influence strength of the positive factors (7.4) suggests a bullish trend for SLB's stock in the coming month.

John-Paul Lake's latest analytical financial article showcases a bullish stance on SLB stock, reflecting his optimism about the company's potential. With four publications since becoming a contributor in 2024, Lake has shared his insights with a growing audience, evident from his 27 subscribers. Although he is relatively new to the platform with a brief tenure, his continuous contributions indicate a dedicated effort to engage with the financial community. While his opinions might not be widely recognized as highly authoritative yet, they provide a fresh perspective worthy of consideration by those following SLB's market performance.

Key Theses

• SLB has reorganized its business to focus on less cyclical products and services needed by the broader oil/gas industry.
• Profit margins are continuing to improve and will support a growing dividend.
• Valuation is near 20-year lows.
• Institutional ownership lags behind peers and could be a catalyst for a rising share price if institutional buying picks up.

Factors Influencing SLB Stock Price

SLB’s shift to less cyclical, higher-margin, and capital-light divisions enhances profitability and stability. This directly supports dividend growth and improves financial predictability, both of which are attractive to investors.

Gross margins improved from 12.75% in 2019 to 19.81% in 2023, indicating significant operational efficiency gains. Higher margins generally lead to increased earnings and, subsequently, higher stock prices.

SLB trades at multiples near 20-year lows, offering a compelling value play. Low valuation implies potential for price appreciation as the market recognizes the improved fundamentals.

Institutional ownership is currently below peers by 4-11 points. An increase in institutional buying could drive demand and push the share price higher.

The Digital and Integration segment is projected to double its revenue from $3.29 billion in 2021 to $6.6 billion by 2025, and operates at a margin of over 30%. This segment alone could represent a significant portion of SLB’s market cap.

The acquisition is expected to yield $400 million in synergies, improving the profitability of the Production Systems segment. However, this factor is contingent on regulatory approval and execution of projected efficiencies.

SLB’s stock is highly correlated with oil prices; prolonged periods of oil prices below $70 per barrel could harm revenues and profitability. Therefore, macroeconomic factors affecting oil prices will significantly impact SLB’s stock.

Commentary

SLB's focused transformation towards less cyclical, high-margin sectors seems to be paying off handsomely. The company has demonstrated exceptional operational prowess by enhancing its profit margins significantly, up from 12.75% in 2019 to 19.81% in 2023. This bolstered financial strength makes a compelling case for dividend growth, which in turn can attract more investors and bolster the share price. Additionally, trading near 20-year low valuations, SLB presents a quintessential value play with room for substantial upside as market recognition grows.

Despite lagging behind peers in institutional ownership, this factor could turn into a positive catalyst if institutional buying accelerates. Moreover, SLB's thriving Digital and Integration segment, projected to double its revenue by 2025, adds an essential layer of optimism. While macroeconomic factors, notably oil prices, remain influential, the overall outlook for SLB appears robust. Given these factors' average significance level hovering around 7.14, SLB's stock could experience a favorable trend in the next 15 days and the coming month.