Are Woodside shares dirt cheap at two-year lows?

This energy giant's shares just hit a two-year low.

| More on:
Worker at a gas and oil pipeline.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Woodside Energy Group Ltd (ASX: WDS) shares may be pushing higher this afternoon, but that wasn't the case in early trade.

At one stage, the energy giant's shares tumbled 1% to a two-year low of $28.19.

When its shares hit that level, it meant that they were down approximately 17% on a 12-month basis.

As a comparison, the ASX 200 index is up approximately 4.5% over the same period.

Are Woodside shares good value now?

One broker that sees significant value in the company's shares at current levels is Morgans.

A note out of the broker from last week reveals that its analysts have an add rating and a $36.00 price target on its shares.

Based on where Woodside shares currently trade, this implies a potential upside of 27% for investors over the next 12 months.

But the returns won't stop there. Morgans expects some attractive dividend yields from the company over the next couple of years.

Its analysts have pencilled in fully franked dividends per share of $1.25 in FY 2024 and then $1.57 in FY 2025. This equates to dividend yields of 4.4% and 5.5%, respectively.

This boosts the total potential 12-month return to approximately 31%.

To put that into context, if Morgans is on the money with its recommendation, a $20,000 investment would turn into $26,200 in a year.

Why is it bullish?

The broker likes Woodside due to its high-quality earnings and cheap valuation. It also expects its acquisition strategy to continue and support its growth. Morgans explains:

A tier 1 upstream oil and gas operator with high-quality earnings that we see as likely to continue pursuing an opportunistic acquisition strategy. WDS's share price has been under pressure in recent months from a combination of oil price volatility and approval issues at Scarborough, its key offshore growth project. With both of those factors now having moderated, with the pullback in oil prices moderating and work at Scarborough back underway, we see now as a good time to add to positions.

Another reason the broker is bullish on Woodside shares is that it has maintained a strong balance sheet despite its capital expenditure. It adds:

Increasing our conviction in our call is the progress WDS is making through the current capex phase, while maintaining a healthy balance sheet and healthy dividend profile. WDS still has to address long-term issues in its fundamentals (such as declining production from key projects NWS/Pluto), but will still generate substantial high-quality earnings for years to come.

Motley Fool contributor James Mickleboro has positions in Woodside Energy Group. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Energy Shares

a man in a business suit looks at a map of the world above a line up of oil barrels with a red arrow heading upwards above them, indicting rising oil prices.
Energy Shares

Woodside, Santos, and this ASX energy stock are storming higher on oil price jump

Oil prices jumped overnight amid escalating tensions between the US and Iran.

Read more »

Young man in shirt and tie staring at his laptop screen watching the Paladin Energy share price tank today
Energy Shares

Looking for opportunity? This sector has fallen the furthest in 2025

Whilst the ASX 200 has largely rebounded from a turbulent start to the year, this sector is yet to recover. 

Read more »

A female coal miner wearing a white hardhat and orange high-vis vest holds a lump of coal and smiles as the Whitehaven Coal share price rises today
Share Gainers

The Coronado Global share price just surged to a 114% weekly gain. Here's why

Investors have sent the ASX coal stock flying higher in June. But why?

Read more »

Worker inspecting oil and gas pipeline.
Dividend Investing

Should I buy Woodside shares today for their 8% dividend yield?

With an 8% dividend yield and a resurgent share price, should I buy Woodside shares right now?

Read more »

Happy coal miner.
Share Gainers

Up 75% this week, why is this ASX All Ords stock rocketing again today?

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

Man pointing at a blue rising share price graph.
Share Gainers

Guess which ASX 300 stock just rocketed 43% on big news!

Investors are piling into this ASX 300 stock on Wednesday. But why?

Read more »

A male oil and gas mechanic wearing a white hardhat walks along a steel platform above a series of gas pipes in a gas plant
Energy Shares

4 reasons to buy Santos shares right now

A leading expert forecasts Santos shares and dividends are set to grow. But why?

Read more »

Man with rocket wings which have flames coming out of them.
Share Gainers

Guess which ASX 200 stock has rocketed 86% since April?

This sky rocketing ASX 200 stock continues to defy short sellers. But how?

Read more »