Reassessing Seadrill (NYSE:SDRL) Valuation After Citigroup’s Downgrade and Shift in Analyst Sentiment

Citigroup Downgrade Puts Fresh Scrutiny on Seadrill

Citigroup's move to cut Seadrill (NYSE:SDRL) from Buy to Neutral, while trimming its outlook, has put fresh attention on a stock already down about 19% this year, despite improving fundamentals.

See our latest analysis for Seadrill.

The downgrade lands after a choppy run for Seadrill, with a roughly 5.6% 1 month share price return failing to offset a near 19% year to date share price decline. The 3 year total shareholder return remains modestly positive, suggesting longer term momentum is soft but not broken.

If you want to see how other energy names are being priced as offshore sentiment shifts, it might be worth scanning fast growing stocks with high insider ownership for potential opportunities beyond Seadrill.

With shares still trading at a steep discount to the average analyst target and earnings momentum turning up, the key question now is whether Seadrill is genuinely undervalued or if the market is already pricing in that future growth.

Most Popular Narrative: 27% Undervalued

With Seadrill last closing at $31.76 against a narrative fair value of $43.50, the story leans heavily on a powerful offshore upcycle ahead.

A significant pickup in offshore exploration activity is expected, as major operators like TotalEnergies and BP commit to multi year, high volume drilling campaigns, and regulatory changes in the US Gulf and Brazil drive more lease sales. This should directly increase future revenue, fleet utilization, and dayrate potential from late 2026 onward.

Read the complete narrative.

Curious how steady but compounding revenue growth, rapidly expanding margins, and a lower future earnings multiple can still support a much higher price? The narrative walks through the math, step by step, and the earnings bridge might surprise you.

Result: Fair Value of $43.50 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, softer utilization and political delays on key contracts could prolong weaker dayrates, disrupting the projected earnings ramp and pushing out capital returns.

Find out about the key risks to this Seadrill narrative.

Another Lens on Valuation

While the narrative points to upside, the current price earnings ratio of 58.3 times stands well above the US Energy Services industry at 18.4 times, peers at 12.8 times, and even a fair ratio of 49.9 times. This raises the risk that expectations are already stretched.

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Seadrill Narrative

If you see the story differently, or would rather dive into the numbers yourself, you can build a complete narrative in just minutes: Do it your way.

A great starting point for your Seadrill research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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