Could the Santos (ASX:STO) share price hit $10 by the end of 2021?

Is it time to buy Santos shares?

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A Santos oil and gas worker wearing a hard hat stands in a yellow field looking at blueprints with an oil rig and blue sky in the background

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The Santos Ltd (ASX: STO) share price has been a solid performer on Monday.

In early afternoon trade, the energy producer’s shares are up 2% to $7.19.

This latest gain means the Santos share price is now up 12% since the start of the year.

Could the Santos share price reach $10.00 by the end of 2021?

The good news for shareholders is that one leading broker still sees plenty of upside for the Santos share price.

According to a note out of Morgan Stanley this morning, its analysts have retained their overweight rating and lifted their price target on the company’s shares to $10.20.

Based on where the company’s shares are trading today, this implies potential upside of approximately 42% for investors.

In addition to this, Morgan Stanley has forecast a 24.3 cents per share dividend in FY 2022. If we add this into the equation, the total potential return stretches beyond 45%.

All in all, it appears as though this broker sees scope for the Santos share price to be trading around the $10.00 mark come the end of the year.

What did the broker say?

The note reveals that Morgan Stanley is bullish on Santos due to its expectation of higher LNG prices.

Its analysts have upgraded their long term LNG price forecasts by almost a third to US$10 per Metric Million British Thermal Unit (MMBtu). This is largely on the belief that demand in Asia will increase materially.

It commented: “We think Asia will consume significantly more natural gas in the early phases of the energy transition […] This will lead to higher LNG prices and better project return, improving investor sentiment towards these projects.”

In addition to this, the broker suspects that M&A activity may continue to heat up. This follows a number of transactions in the sector including BHP Group Ltd (ASX BHP) merging its petroleum assets with Woodside Petroleum Limited (ASX: WPL).

This could make the Santos share price one to watch in the coming months.

Should you invest $1,000 in Santos right now?

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. 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 Bruce Jackson.

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