HSBC reiterates ‘buy’ rating ahead of Royal Dutch Shell’s Q1 results

Analysts at HSBC remain optimistic about the oil and gas major ahead of its first quarter results on Thursday, despite oil prices at record lows and share buybacks facing resistance amid the Covid-19 crisis.

Analysts at HSBC reiterated their ‘buy’ rating for Royal Dutch Shell ahead of its first-quarter (Q1) results on Thursday 30 April, despite oil prices at record lows amid the Covid-19 crisis.

The lender did downgrade its target price for the stock to £15.45 per share in April, implying a potential upside of 7% for the oil and gas major based on Shell closing at £14.32 on Tuesday.

Share buybacks face resistance amid Covid-19

Shell is the largest purchaser of its own shares on the FTSE 100, with the company spending around £25 billion in share buybacks since 2010, with £10 billion of that total spent in 2019 – much to the delight of its shareholders.

However, since the Covid-19 outbreak lots of FTSE 100 companies have opted to cancel share buyback programmes and postpone dividend pay-outs to shareholders as a means of shoring up their balance sheets and mitigate the economic fallout from the pandemic.

‘Given the current macroeconomic conditions, we have announced a reduction in cash capital expenditure for 2020 to $20 billion or below from a planned level of around $25 billion,’ Shell said in its FY results in January.

Investors will be eager to see if Shell cancels its dividend in 2020 and opts to halt share buybacks, with the latter likely to weigh heavily on its share price.

‘Closer scrutiny of social issues may make it more difficult to continue with (or restart) distributions in line with prior practice,’ Victoria Kalb, a sustainability analyst at UBS, said in a recent note. ‘If distributions resume, we think dividends could be less controversial than buybacks.’

‘Pre-Covid, buybacks were already under scrutiny particularly in light of widespread issues around inequality,’ she added. ‘Given the significant social and societal issues raised by the crisis, companies could be under pressure to avoid restarting repurchases.’

Royal Dutch Shell: Technical analysis

Having broken below the bearish wedge of late March and early April, the price looks set for more declines, according to Chris Beauchamp, chief market analyst at IG.

Further losses below £12 would open the way to the March lows at £8.94. The price needs to rally back above the March gap down, which in this case would see the price clear £16.

This would also put it above the 50-day simple moving average (SMA) for the first time since the beginning of the year. There has been some sign of stabilisation above £12.50, with the price beginning to recover from its mid-month weakness.

How to trade stocks with IG

Looking to trade Royal Dutch Shell and other stocks? Open a live or demo account with IG and buy (long) or sell (short) the asset using derivatives like CFDs in a few easy steps:

  1. Create an IG trading account or log in to your existing account

  2. Enter ‘Royal Dutch Shell’ in the search bar and select it

  3. Choose your position size

  4. Click on ‘buy’ or ‘sell’ in the deal ticket

  5. Confirm the trade


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change
-
-
-
-
-
-
-
-
-
-
-
-
Sell
Buy
Updated
Change
-
-
-
-
China 300
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.