Shell (LSE:SHEL) Expands Aviation Fuel Supply, Is It Still Below Fair Value?
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Shell (LSE:SHEL) is back in focus after reaching a five year agreement with Delta Air Lines to expand sustainable aviation fuel capacity and infrastructure across key U.S. airport hubs, highlighting the company's role in lower carbon aviation fuels.
Recent news around sustainable aviation fuel and LNG supply comes as Shell's share price sits at £32.54, with a 30 day share price return of 8.70% and year to date share price return of 17.92%. The 1 year total shareholder return of 29.04% and 5 year total shareholder return of 183.38% point to momentum that has been built over time, despite a 90 day share price return that declined 1.38%.
If you are looking beyond Shell and into other parts of the energy supply chain, it could be a good moment to scan 35 power grid technology and infrastructure stocks
Shell looks like a powerful, broad based energy business and recent agreements around sustainable aviation fuel underline that reach. However, at £32.54 after a strong run, is the current share price still offering clear value?
According to the most followed narrative on Shell, the fair value of £35.51 sits above the last close of £32.54, which frames the stock as modestly undervalued on this view.
Shell is not only a producer in this market but also the world's largest "optimization" player. By taking advantage of price differences (arbitrage) between the Atlantic and Pacific basins, the company has created a profit center independent of commodity prices.
Want to see what sits behind that arbitrage story and the fair value estimate on Shell? The narrative leans heavily on LNG portfolio scale, trading flexibility and the economics assumed for long term gas demand and margins. The key assumptions are all laid out, but only if you read the full piece.
Result: Fair Value of £35.51 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, Shell's LNG-heavy narrative still faces risks if global gas demand or pricing assumptions shift sharply, or if energy transition policies tighten faster than expected.
Find out about the key risks to this Shell narrative.
Given the mix of enthusiasm around Shell and the clear risks flagged, it makes sense to check the numbers yourself and move quickly to an informed view. To see both sides of the debate in one place, review the 4 key rewards and 1 important warning sign
Shell might be front of mind today, but some of the most interesting opportunities often sit just outside your current watchlist, so do not leave those unchecked.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include SHEL.L.
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