Should you buy the dip in the Santos share price?

Is now a good time to buy this energy giant's shares?

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The Santos Ltd (ASX: STO) share price had a tough session on Wednesday.

The energy producer's shares ended the day 2.5% lower at $6.97.

This followed a sharp pullback in oil prices, which was weighing heavily on the energy sector.

Should you buy the dip in the Santos share price?

A number of brokers are likely to believe that the weakness in the Santos share price is a buying opportunity.

For example, in response to the company's recent quarterly update, Morgans retained its add rating with a $8.75 price target.

Based on the current Santos share price, this implies potential upside of 25.5%.

While Morgans acknowledges that this has been a frustrating period for Santos, it believes the value on offer with its shares make it worth sticking with the company. It explained:

The frustrating period of external factors dragging on its performance continues for STO, leaving STO trading at a discount to value. Not helped by the Australian Federal government announcing compounding energy policy changes that have impacted business, lender and investor confidence. While at a company level STO is still working through the extraordinary re-approvals process at the Barossa field.

The broker also highlights that Santos offers strong growth potential, which is something that is hard to find in the sector. It adds:

Not a lot of our large-cap energy or mining coverage universe actually offer compelling growth, but STO has pieced together an attractive collection of growth assets in PNG, Alaska, Darwin and on the east coast.

Is anyone else positive?

It is a similar story over at Macquarie, where its analysts responded by retaining their outperform rating with an improved price target of $9.95.

This suggests that Santos' shares could rise by a sizeable 43% from current levels.

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 Scott Phillips.

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