We recently published a list of 12 Most Promising Energy Stocks According to Analysts. In this article, we are going to take a look at where Schlumberger Limited (NYSE:SLB) stands against other most promising energy stocks according to analysts.
With the world pivoting towards cleaner energy sources and facing political uncertainties, 2025 can be a critical year for the broader energy sector. As per GlobalData’s Power Predictions 2025 report, numerous themes are expected to shape the global power landscape in 2025. These include geopolitical shifts influencing supply chains, developments in EVs, energy storage, hydrogen, and nuclear power. As per the Short-Term Energy Outlook released by the US Energy Information Administration, the generation in the US electric power sector is expected to increase by 2% in 2025 and by 1% in 2026, after rising 3% last year, driven by growth in renewable energy sources.
What Lies Ahead for the US Energy Sector?
As per AXA Investment Managers, the combination of increased demand and supply constraints resulted in a favourable backdrop for the broader US renewable energy sector. Furthermore, the lower cost and environmental benefits of renewable energy are some positive factors. Trump’s return to the White House kicked off with several executive orders. Apart from announcing a national energy emergency, he ordered the withdrawal from the Paris Agreement on climate change and rolled back the clean energy initiatives.
Despite such announcements, AXA Investment Managers expects the US clean energy sector to have potential investment opportunities, considering the increasing power demand. The US power demand growth remained weak between 2000 and 2020, averaging 1%. However, it is projected to increase from 2024 onwards. As per the investment management firm, a 2% – 3% increase in the growth rate per annum will be significant, reflecting a doubling or tripling of the historical rate. The overall US power demand can grow at a CAGR of 3.1% between 2020 and 2040, against 0.1% between 2010 and 2020. This higher demand will be supportive of the long-term trend, with potential investment opportunities, from power companies to the ones involved in the energy and equipment supply chain.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Trump’s Deregulation To Be a Critical Growth Factor
One of the President’s priorities revolves around reducing government bureaucracy and inefficiency. Notably, permitting new energy projects remained slow over the past few years because of understaffed government departments and burdensome environmental criteria, opines AXA Investment Managers. In an executive order on “unleashing American energy”, Donald Trump is focusing on reducing official rules and processes that seem unnecessary, and accelerating energy projects, constraining the remit of the NEPA (National Environmental Policy Act). Interestingly, most of the permit requirements stem from this act.
Overall, economics, growth and a continued climate of innovation and competition hint at the robust US power demand, which can also support the prospects of clean energy and its supply chains.
Our Methodology
To list the 12 Most Promising Energy Stocks According to Analysts, we used a screener to find companies catering to the energy sector. Next, we chose the ones that analysts see the most upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 12. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
An aerial view of a well site, depicting the scale of oil and gas operations.
Schlumberger Limited (NYSE:SLB)
Average Upside Potential: 27.8%
Number of Hedge Fund Holders: 65
Schlumberger Limited (NYSE:SLB) is engaged in the provision of technology for the energy industry. Citi upped the company’s price target to $54 from $50, keeping a “Buy” rating on its shares after it reported strong earnings and an even better 2025 update. The firm believes that Schlumberger Limited (NYSE:SLB) makes the case for flat revenue and EBITDA in 2025, despite a sizable asset sale and numerous market headwinds. Citi raised its EBITDA forecast, including ChampionX, to $9.59 billion in 2025, or $9.79 billion including other income.
In FY 2024, Schlumberger Limited (NYSE:SLB)’s revenue increased by 10% YoY and adjusted EBITDA went up by 12% YoY, while generating $3.99 billion in FCF, allowing it to return $3.27 billion to shareholders and reduce net debt by $571 million. The company opines that long-term fundamentals are expected to support oil and gas investment. While upstream investment growth is expected to remain subdued in the short term as a result of global oversupply, Schlumberger Limited (NYSE:SLB) anticipates that the oil supply imbalance will gradually abate.
Also, global economic growth and a significant focus on energy security, together with higher energy demand from AI and data centers will aid the investment outlook for the oil and gas industry during the rest of the decade. ClearBridge Investments, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“Our largest sell was Baker Hughes, which we made to fund our new position in oilfield service provider peer Schlumberger Limited (NYSE:SLB). While we acknowledge that Baker Hughes has stronger near-term tailwinds, its strong performance has resulted in a historically wide valuation gap to Schlumberger. Schlumberger has similar exposure to the oil and gas industry, but also has an improving portfolio of assets and greater digital initiatives that we believe will lead it to outperform Baker Hughes over the long run.”
Overall, SLB ranks 8th on our list of most promising energy stocks according to analysts. While we acknowledge the potential of SLB as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SLB but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
