Are Woodside shares the number one pick in the energy sector?

One leading broker thinks that the energy giant is the best option for investors right now.

| More on:
An oil worker in front of a pumpjack using a tablet PC.

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 are having a good start to the week.

At the time of writing, the ASX 200 energy stock is up 1.5% to $25.42.

While this gain is positive, it pales in comparison to what might lie ahead for its shares according to one leading broker.

Woodside shares tipped to rise

According to a recent note out of Morgans, its analysts think that Woodside is the best ASX 200 energy stock to buy right now.

In order of preference, the broker rates Woodside first, Karoon Energy Ltd (ASX: KAR) second, Beach Energy Ltd (ASX: BPT) third, and Santos Ltd (ASX: STO) fourth.

The broker currently has an add rating and $33.00 price target on Woodside's shares. Based on its latest share price, this implies potential upside of 30% for investors over the next 12 months.

To put that into context, a $5,000 investment would turn into approximately $6,500 by this time next year if Morgans is on the money with its recommendation.

Commenting on the sector, the broker recently said:

Oil demand is tracking modestly ahead of expectations, while robust supply is failing to keep pace. We expect the oil market to enter a deficit supply balance during 2H 2024. The oil market may be pricing in some demand destruction, but if that does not materialise, we expect Brent oil to recover to >$80/bbl in the next 1-3 months. Forced ranking of our oil-exposed coverage at current share prices: #1 WDS, #2 KAR, #3 BPT, and #4 STO.

Why Woodside?

Morgans believes that Woodside shares offer attractive long-term value for patient investors. Particularly given how the market appears to be undervaluing them at present. It said:

The tide is certainly out in terms of investor sentiment on WDS. Despite Brent oil trading in line with our long-term forecast, WDS' share price implies a near cycle-low oil price level. We do not see this as capable of being explained by WDS' growth profile (comfortably funded) or risks around non-core assets such as Browse.

While the share price performance has been disappointing, supported by a strong balance sheet and high margins, we see WDS investors as capable of being patient. Investment view: We maintain an ADD recommendation believing WDS offers attractive long-term value.

It is also worth noting that Morgans expects some good dividend yields from the energy giant in the near term.

It is forecasting fully franked dividends of approximately $1.83 per share in FY 2024 and then $1.52 per share in FY 2025. This equates to yields of 7.2% and 6%, respectively.

Should you invest $1,000 in Beach Energy Limited right now?

Before you buy Beach Energy Limited shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Beach Energy Limited wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 6 March 2025

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

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Energy Shares

Why is this ASX coal share crashing 13% on Thursday?

It's a poor day on the market for many ASX coal shares today.

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Energy Shares

How low can the oil price go? Here's Citi's 2025 forecast

Here’s what Citi says investors can expect from the oil price in the year ahead.

Read more »

Miner looking at a tablet.
Energy Shares

ASX 200 uranium share lights up on Queensland acquisition

The ASX 200 uranium producer is increasing its Queensland assets.

Read more »

Overjoyed man celebrating success with yes gesture after getting some good news on mobile.
Energy Shares

Guess which ASX uranium stock is racing higher on huge news

Let's find out what this uranium developer has announced on Wednesday.

Read more »

A kid stretches up to reach the top of the ruler drawn on the wall behind.
Energy Shares

This ASX 200 share is down 40% in 2 months, an expert says it has significant potential

This fund manager has outlined why this stock has a positive future.

Read more »

oil and gas worker checks phone on site in front of oil and gas equipment
Energy Shares

Why ASX 200 energy shares are facing a plunging oil price in 2025

Just how low will the oil price go in 2025? Let’s find out.

Read more »

Man with a hand on his head looks at a red stock market chart showing a falling share price.
Share Market News

Why did the ASX 200 hit a six-month low last week?

There was turmoil on the share market with ASX 200 energy stocks the worst affected.

Read more »

Woman refuelling the gas tank at fuel pump, symbolising the Ampol share price.
Energy Shares

This ASX 200 share just hit a 52-week low, one expert thinks it's a great buy

UBS believes this stock could significantly drive returns.

Read more »