Digital Platforms And Low-Carbon Efforts Will Fuel Secular Energy Demand

AN
AnalystHighTarget
AnalystHighTarget
Not Invested
Consensus Narrative from 28 Analysts
Published
13 Jul 25
Updated
30 Jul 25
AnalystHighTarget's Fair Value
US$56.69
42.0% undervalued intrinsic discount
30 Jul
US$32.88
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1Y
-24.9%
7D
-8.7%

Author's Valuation

US$56.7

42.0% undervalued intrinsic discount

AnalystHighTarget Fair Value

Key Takeaways

  • Transformative acquisitions, digital growth, and advanced technologies position the company for sustained market leadership, resilient global earnings, and structurally higher margins.
  • Expanding in low-carbon solutions and energy transition markets unlocks scalable, high-margin revenue streams, reinforcing long-term competitive advantage and industry relevance.
  • Accelerating energy transition, delayed diversification, and rising ESG pressures threaten SLB's future revenue, margins, and investment capacity amid growing market and competitive risks.

Catalysts

About Schlumberger
    Engages in the provision of technology for the energy industry worldwide.
What are the underlying business or industry changes driving this perspective?
  • Analyst consensus views the ChampionX acquisition as incrementally positive, but this materially underestimates the transformative potential for SLB: the integration will accelerate the creation of a globally dominant, end-to-end production optimization platform, significantly increasing market share, accelerating international revenue synergies, and delivering sustained EBITDA margin expansion well beyond initial synergy targets.
  • Analyst consensus expects strong Digital & Integration growth, but this outlook remains too conservative; the rapid adoption of SLB's DELFI platform, burgeoning AI offerings like Lumi, and new verticals such as stand-alone digital services position the segment for structural outperformance, pointing to high-teens or higher annual growth rates and structurally higher net margins for years to come.
  • SLB's unparalleled global footprint and technological leadership, combined with surging demand for diversified and secure energy supply from developing economies, positions the company as the premier beneficiary of multi-decade, above-GDP growth in global oil, gas, and gas-to-power development, driving superior top-line growth and resilient, geographically diverse earnings streams.
  • Expanding investments and capability in low-carbon and decarbonization solutions-including integrated CCS offerings (Capturi/Sequestri), geothermal, hydrogen, and grid-scale energy infrastructure-will enable SLB to become a global leader in energy transition markets, unlocking entirely new, rapidly scaling revenue streams with attractive long-term margin profiles.
  • Increasing complexity of energy projects, combined with an industry-wide shortage of skilled labor and technical expertise, is rapidly consolidating pricing power and technical relevance among a handful of providers; SLB's scale, digital depth, and proven operational efficiency support sustained margin expansion and robust free cash flow generation, irrespective of traditional industry cycles.

Schlumberger Earnings and Revenue Growth

Schlumberger Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • This narrative explores a more optimistic perspective on Schlumberger compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
  • The bullish analysts are assuming Schlumberger's revenue will grow by 5.4% annually over the next 3 years.
  • The bullish analysts assume that profit margins will increase from 11.5% today to 14.3% in 3 years time.
  • The bullish analysts expect earnings to reach $5.9 billion (and earnings per share of $4.14) by about July 2028, up from $4.1 billion today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.2x on those 2028 earnings, up from 13.0x today. This future PE is greater than the current PE for the US Energy Services industry at 11.7x.
  • Analysts expect the number of shares outstanding to decline by 4.83% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 7.44%, as per the Simply Wall St company report.

Schlumberger Future Earnings Per Share Growth

Schlumberger Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The accelerating global transition to renewable energy and stricter climate policies could progressively reduce demand for SLB's core oil and gas services, shrinking the company's long-term revenue base and challenging its ability to deliver sustained top-line growth.
  • Overexposure to international and offshore markets introduces significant volatility as these sectors are more susceptible to decarbonization-driven capital expenditure cuts, threatening revenue stability and posing a risk to consistent net margin performance.
  • Despite recent investment in digital and low-carbon solutions, SLB's legacy reliance on traditional oilfield services and the delayed diversification into newer energy technologies may result in stagnating or declining earnings as hydrocarbon demand plateaus or falls.
  • Intensifying competition from national oil company service arms and broader adoption of digital automation and AI could erode SLB's market share and pricing power, pressuring overall operating margins and limiting future profit growth.
  • Increased ESG scrutiny, investor divestment from fossil fuel-linked businesses, and a capital-intensive cost structure may raise SLB's long-term cost of capital and restrict access to financing, impacting future net margins and constraining investment in growth initiatives.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The assumed bullish price target for Schlumberger is $56.69, which represents two standard deviations above the consensus price target of $45.64. This valuation is based on what can be assumed as the expectations of Schlumberger's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  • However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $63.0, and the most bearish reporting a price target of just $36.0.
  • In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $41.6 billion, earnings will come to $5.9 billion, and it would be trading on a PE ratio of 15.2x, assuming you use a discount rate of 7.4%.
  • Given the current share price of $35.63, the bullish analyst price target of $56.69 is 37.2% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystHighTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystHighTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystHighTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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