SLB Stock in Focus. Is This Oilfield Leader a Buy, Sell, or Hold?
We first explored oil price projections and the future of energy in September of last year. Back then, we predicted that electric vehicle sales would surpass those of combustion-engine cars worldwide within the next decade, making investments in the oil industry appear increasingly risky
Much has changed since then—electric vehicle sales have slowed, and many automakers have stepped back from committing to a fully electric future by a specific date. These shifts are now reflected in the futures market, with oil prices (WTI and Brent) aligning closely with spot prices.
For example, in September 2023, WTI futures for December 2024 were at $78.89, while December 2033 futures were priced at $54.57. As of November 2024, the December 2024 WTI price stands at $68.50, and the December 2033 price at $62.50. Although a fully electric future is inevitable, it now appears to be at least two decades—or perhaps even longer—away
This normalization in the price of oil has given us the idea to look for oil stocks, and Schlumberger Ltd (SLB) is our best choice and here is why:
1) SLB – leading oil services stock with a firm valuation
SLB, with a market cap of 60 billion USD, is one of the top oil stocks in the US. Ideally, we would like to invest in the leaders of the industry, but unfortunately, XOM and CVX have worse valuations.
Moreover, while SLB is not the biggest oil stock in the US, it is the biggest in one sector – the Oil Service Sector (OIH ETF).
2) Stock analysts universally like SLB
3) Analysts’ Price Targets indicate at least 35% upside potential
Not only is the average price target more than 30% higher than the current price, but even the lowest target indicates at least a 15% upside.
4) SLB is trading at a discount to its benchmark
| 2024 P/E | 2025 Forward P/E | 2026 Forward P/E | 2027 Forward P/E | 2028 Forward P/E | 2029 Forward P/E | |
| SLB | 12,76 | 11,72 | 10,43 | 9,64 | 8,94 | 8,3 |
| XLE | 14,87 | 14,13 | 12,78 | 12,15 | 11,54 | 10,96 |
SLB stock is trading at a discount to XLE on a PE ratio basis and is also expected to grow its earnings much faster than most companies in the sector. Analysts expect SLB to grow its earnings by about 10-12% annually in the next five years, while the same expectations for companies in the XLE ETF are for an average growth of 5.25% annually.
5) SLB has strong support among institutional investors
While XOM and CVX have institutional ownership rates of 65% and 76%, respectively, SLB has an institutional ownership rate of 85%. That rate is much higher than our traditional hurdle rate of 70% – and one of the highest institutional ownership rates in the sector.
6) SLB Stock is not heavily shorted
While SLB’s short ratio is 2.75% of its float, we deem this ratio not abnormally high. It is undoubtedly below our hurdle rate of 5%. Ideally, we would like it to be lower, but sometimes, things are not always perfect in life.
7) SLB was founded nearly 100 years ago
We deem this time period to be sufficiently long. The company and its business practices have survived the test of time, and we are confident that, given enough time, investments in the company would prove profitable.