What does Macquarie think Santos shares are worth?

Is now the time to buy Santos shares?

| More on:
Worker inspecting oil and gas 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

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.

More on Energy Shares

Gas and oil plant with a inspector in the background.
Energy Shares

Does Macquarie rate Origin Energy shares a buy, hold or sell?

The broker has given its verdict on the energy giant. Let's see what it is saying.

Read more »

An oil worker in front of a pumpjack using a tablet PC.
Energy Shares

Ord Minnett tips Woodside shares to rise 15%+

Market-beating returns could be on offer from this energy giant.

Read more »

Workers inspecting a gas pipeline.
Energy Shares

Woodside share price lifts amid pending $25 billion project extension decision

Woodside shares are pushing higher ahead of a vital government project determination.

Read more »

gas burner alight on a stove
Energy Shares

What does Macquarie think AGL shares are worth?

How bullish is Macquarie on this major energy player?

Read more »

A man in a suit face palms at the downturn happening with shares today.
Energy Shares

Why is the Origin Energy share price sinking 4% today?

Let's find out why investors are hitting the sell button on Monday.

Read more »

A woman holds her finger to the side of her lips in contemplation as she looks upwards to an array of graphic images of light bulbs above her head, one of which is on and glowing.
Energy Shares

Do brokers think the AGL share price is a buy?

Are AGL shares a good investment right now?

Read more »

Cheerful businessman with a mining hat on the table sitting back with his arms behind his head while looking at his laptop's screen.
Energy Shares

With the 8% dividend yield, is the Woodside share price a buy?

Can investors get energised about this stock’s passive income potential?

Read more »

A young male ASX investor raises his clenched fists in excitement because of rising ASX share prices today
Energy Shares

Why are ASX uranium stocks rocketing today?

These shares are shining brightly on Friday. Let's find out why.

Read more »