European Markets vs. the Magnificent Seven
The “Magnificent Seven” tech stocks, including the likes of Nvidia, Microsoft, and Amazon, have undeniably shaped the U.S. market with their immense market cap growth in recent years. These giants have propelled market returns, leaving a significant mark on investors.
However, Europe has its own power players – the GRANOLAS – a formidable group of stocks identified by Goldman Sachs that have been driving European market highs. The GRANOLAS, comprising companies like GSK and Nestle, offer a different sector mix, focusing more on healthcare and consumer discretionary than on technology.
JPMorgan’s Top Picks for European Energy
For investors seeking opportunities in the European market, JPMorgan has identified promising stocks worth considering. Among their recommendations are three energy companies that not only show potential for growth but also provide dividend income.
1. Eni S.P.A. (E)
Eni, a key player in the energy sector with operations spanning across 62 countries, has caught the eye of JPMorgan. Despite recent EPS setbacks, the company is focusing on expanding its biorefining capacity and exploring spinoffs in renewable energy. With a forward P/E ratio of 6.3, Eni appears attractively valued for investors eyeing long-term gains.
2. TotalEnergies Se (TTE)
TotalEnergies, a well-established integrated energy company with diverse business segments, presents another interesting opportunity according to JPMorgan. Despite recent earnings declines, the company’s strategic stake in SunPower, a prominent solar power provider in the U.S., adds to its growth potential. With analysts forecasting EPS growth and a moderate valuation, TotalEnergies is positioned as a strong contender in the energy market.
Royal Dutch Shell: A Strategic Oil and Gas Giant
Embarking on a journey through the annals of history, we find Royal Dutch Shell (SHEL) emerging like a phoenix in 1907, born from the union of the Royal Dutch Petroleum Company of the Netherlands and The “Shell” Transport and Trading Company of the UK. This oil and gas behemoth, a titan in the global oil production realm, engages in a symphony of upstream and downstream activities, interwoven with integrated gas and renewables. With a market cap towering at $204.9 billion, Shell stands as a colossus in the energy industry.
Despite the stock experiencing a slight decline of 2.5% in year-to-date figures, all eyes remain fixated on Shell, offering a tantalizing dividend yield of 4.38%. surpassing its counterparts in the energy sector. And with a mere 15.5% payout ratio, the company possesses untapped potential to enhance its dividend payouts in the future.
Resilience Amidst Adversity
Weathering the storm, Shell revealed an earnings per share (EPS) of $2.22 in its latest quarterly report, marking a 20.1% downturn from the previous year, yet surpassing expectations by a significant margin. In an impressive feat, the oil giant slashed its net debt by 3% year on year, now standing at $43.5 billion.
With tactical precision, Shell is honing its focus on its core operations, underscoring a strategic shift by divesting stakes in its international ventures. The divestments include bidding adieu to two offshore production-sharing agreements in Malaysia’s Baram Delta, parting ways with a 35% share in Indonesia’s Masela block, surrendering a 51.8% stake in Aera Energy, and bidding farewell to its onshore activities in Nigeria.
Charting New Horizons
As the company unfurls its strategic roadmap, Shell turns its gaze towards the Sparta project nestled in the Garden Banks region off the Gulf Coast of Louisiana. A deep-sea oil endeavor, Sparta is poised to commence production in 2028, with promising projections of yielding 90Mboe/d and 244MMboe in recoverable resources. In the foreseeable future, Shell anticipates ushering in 500Mbbl/d of new production by 2025.
In the realm of financial augury, JPMorgan’s seers foresee a 5% EPS growth for Shell by 2025, with a forward price-to-earnings (P/E) ratio marked at 7.7.
Enveloped in a shroud of optimism, market analysts shower Shell stock with a unanimous “Strong Buy” sentiment, setting a mean target price of $75.17, signaling a potential upswing of approximately 18% ahead. Among the 11 analysts donning their analytical hats, 8 advocate a “Strong Buy” stance, while the remaining 3 maintain a prudent “Hold” outlook.