Woodside Energy Group Ltd (ASX: WDS) shares have been having a tough year.
As things stand, the energy giant's shares are on track to record a decline of 25% for 2024.
Does this weakness mean that its shares are dirt cheap now? Let's see what brokers are saying.
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Are Woodside shares dirt cheap?
Despite its decline, opinion remains divided on whether its shares are in the buy zone.
Let's start with Citi, which is bearish and has a sell rating and $21.50 price target on them. This implies potential downside of almost 9% for investors from current levels.
Sitting on the fence are brokers such as Macquarie (neutral $27.00), Ord Minnett (hold $27.50), and Goldman Sachs (neutral $26.90).
However, all three of these price targets imply potential upside of at least 14% for investors over the next 12 months. That's not bad for a neutral rating and could support the view that its shares are indeed cheap.
Commenting on its neutral rating, Goldman Sachs said:
We are Neutral rated on WDS on 1) Relatively full valuation trading at 0.9x NAV, 2) Ongoing Sangomar royalty risk, 3) Limited near-term production growth to offset potential commodity price weakness offering -1% production CAGR to 2027. Our A$26.9/sh 12m PT is unchanged, set at an equal blend of NAV (A$26.5/sh) and EV/EBITDAX with a 4.5x target multiple.
Key upside risks: Higher oil and gas prices, slower production decline at existing assets, exploration success, value accretive M&A. Key downside risks: Regulatory change, lower oil and gas prices, faster production decline, development project delays, higher capex for development projects including Scarborough, Pluto Train 2, Trion, value destructive M&A.
Bullish view
The team at Morgans certainly believes that Woodside shares are cheap. The broker currently has an add rating and $33.00 price target on them, which implies potential upside of 40% for investors.
Its analysts see attractive long-term value on offer right now. The broker explains:
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. We maintain an ADD recommendation believing WDS offers attractive long-term value.
