A Look at Schlumberger’s (SLB) Valuation Following Major Deepwater Contract Win with Petrobras

Schlumberger (NYSE:SLB) just landed a major contract win that is sure to have investors sitting up and taking notice. The company announced it will provide services and cutting-edge technology for up to 35 ultra-deepwater wells in Brazil’s Santos Basin, following a competitive award from Petrobras. The deal’s scale and focus on advanced electric completions and real-time digital intelligence highlight both the technical challenges and the growth potential involved in opening up new reserves in some of the world’s most challenging oilfields.

This news arrives as the stock is recovering from a tougher year. Schlumberger’s share price gained 2.7% in the recent session, outpacing the broader S&P 500. Still, the stock remains down over the past twelve months, despite earlier wins including the integration of ChampionX and a series of new contracts. Momentum lately has picked up again, suggesting the market is starting to consider the impact of both acquisitions and strategic wins such as the Petrobras contract.

After a year of mixed performance, the key question is whether Schlumberger represents a potential value at current levels or if the market has already factored in the promise of these deepwater achievements.

Most Popular Narrative: 23.9% Undervalued

According to the most widely followed analyst narrative, Schlumberger is currently seen as materially undervalued, with a fair value estimate suggesting significant upside from today's levels.

Persistent industry demand for digital transformation, automation, and efficiency—driven by operator focus on production optimization and recovery—has led to strong adoption and double-digit year-over-year growth in SLB's digital business (notably the DELFI platform), which bolsters net margins and creates a more stable, higher-margin recurring revenue stream.

Curious about what is fueling all the optimism in this valuation? The secret sauce includes aggressive projections for both earnings and margins, and hinges on steady leadership in digital energy services. There is one especially bold assumption about future multiples that sets this narrative apart. Want to understand the quantitative logic behind the bullish price target? Dive deeper to discover the critical financial drivers analysts are betting on.

Result: Fair Value of $46.69 (UNDERVALUED)

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

However, persistent macro uncertainty and weak activity in key markets like Mexico and Saudi Arabia could quickly undermine bullish expectations for Schlumberger's growth trajectory.

Find out about the key risks to this Schlumberger narrative.

Another View: SWS DCF Model

To balance the analyst-driven outlook, our SWS DCF model points to the stock being undervalued as well, though it uses a different approach. Could this alternative lens suggest even more potential than expected?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Schlumberger for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Schlumberger Narrative

If you see things differently or want to dig into the numbers for yourself, building your own perspective takes just a few minutes. Do it your way.

A great starting point for your Schlumberger research is our analysis highlighting 3 key rewards and 3 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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