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.
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.
