What does Macquarie think Santos shares are worth?

Is now the time to buy Santos shares?

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Broker Macquarie has listed Santos Ltd (ASX: STO) shares as one energy stock that could bring strong returns in the next 12 months. 

Santos is the second-largest company in the ASX energy sector based on market capitalisation

Santos is a global energy company with operations across Australia, Papua New Guinea (PNG), Timor-Leste, and the United States of America (USA).

It is an Australian domestic gas supplier and a liquefied natural gas (LNG) supplier in Asia.

However, it has had a rough start to 2025. Its share price has fallen 17.13% so far this year. 

Created with Highcharts 11.4.3Santos PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.com.au

This fall has been consistent with other energy stocks, with the S&P/ASX 200 Energy Index (ASX: XEJ) down more than 22% in the same period. 

Why does Macquarie believe in Santos?

According to Macquarie, now could be a good time to buy Santos shares. 

In the report released by the broker last week, it said: 

"US tariffs have driven more volatility and ultimately, lower oil prices. Whilst STO's gearing is at the upper end of its 15-25% target range, it has a major FCF inflection approaching as new projects come onstream (Barossa 3Q25, Pikka 2H25 if logistics go well)."

The report projects the company to reach a free cash flow inflection point, meaning a transition to much higher cash generation.

Furthermore, Santos is set to commence production at its Barossa gas project in Q3 2025 and potentially begin early oil production from the Pikka project in 2H 2025

It's worth noting that Macquarie raises the possibility of a dip in 2Q production due to flooding in the Cooper Basin.

What is the upside for Santos shares?

At the time of writing, Santos shares are trading at $5.61 each. 

Macquarie has a 12-month price target of $8.50. 

If it hits that price target in the next year, investors would enjoy a 51.5% gain. 

Elsewhere, Goldman Sachs also sees high upside for Santos shares, with a price target of $7.85. 

Bell Potter has a price target of $7.49. 

According to the broker, Santos is positioned for growth with successful project completions and maintaining a disciplined, low-cost operating model. 

Motley Fool contributor Aaron Bell has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group and Macquarie Group. The Motley Fool Australia has positions in and has recommended Macquarie Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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