Why Shell No Longer Has a Moat

Too much uncertainty surrounds its new strategy and commodity prices.

Allen Good, CFA 29 June, 2021 | 4:28AM
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We have downgraded our economic moat rating for Shell (RDS.A)/(RDS.B) to none from narrow. Our forecast for excess returns has become too low while the company’s future uncertainty is too high to award a moat.

The moat downgrade negatively affected our valuation, although this was partially offset by higher oil prices since our last update. The shares still appear cheap, trading more than 20% below our revised fair value estimate, but given a lower yield and less oil exposure, Shell might lag in an oil price rally.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Royal Dutch Shell PLC ADR Class A48.86 USD-0.41Rating
Royal Dutch Shell PLC ADR Class B49.01 USD-0.61Rating

About Author

Allen Good, CFA

Allen Good, CFA  Allen Good, CFA, is an energy strategist for Morningstar.

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