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SLB stock backed by key digital partnerships and AI advancements - Bernstein

EditorEmilio Ghigini
Published 30/09/2024, 11:24
SLB
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On Monday, Bernstein SocGen Group maintained its Outperform rating and $68.00 price target for SLB (NYSE: SLB) stock, following significant developments at the company's 2024 Digital Forum held in Monaco from September 16 to September 19.

The forum, a biennial event, gathered approximately 1,500 experts from the energy and technology sectors to discuss the intersection of three key trends: the ascent of the Global South, the integration of Digital/AI technologies, and the challenge of meeting increasing energy demands while reducing greenhouse gas (GHG) emissions.

SLB announced the launch of 'Lumi,' a platform that combines artificial intelligence with the company's industry-specific workflows and data. Additionally, SLB revealed a collaboration with Aramco (TADAWUL:2222) to develop digital solutions aimed at reducing GHG emissions in Saudi Arabia. A further partnership with NVIDIA (NASDAQ:NVDA) was announced to create generative AI solutions for the energy sector.

The analyst highlighted 12 key takeaways from the forum, which included insights on the Middle East energy sector, the role of Adnoc Drilling, and the prioritization of digital drilling and production. The CEO's commitment to digital transformation, the potential for digital technologies to aid the industry, and the specifics of the Lumi platform were also noted.

The analyst underscored SLB's increased optimism in digital technologies, the strategic nature of its partnerships with Aramco and NVIDIA, and the importance of cultivating a collaborative culture within SLB.

The analyst recommended "the nonasphere of automation," a publication by Jay Huang, as essential reading, without detailing its content. This recommendation was part of the broader discussion at the forum, which seemed to emphasize the transformative potential of digital and AI technologies in the energy industry.

In other recent news, Schlumberger Limited (NYSE:SLB) has announced a series of significant developments. SLB has expanded its partnership with NVIDIA, aiming to expedite the creation of AI solutions tailored for the energy industry. The company has also launched the Lumi data and AI platform, designed to enhance energy workflows.

However, CFRA has downgraded Schlumberger from Buy to Hold, adjusting the price target to $42 from $59 due to expected macroeconomic challenges. The earnings per share estimates for 2024 and 2025 have been revised to $3.43 and $3.91, respectively.

SLB's proposed acquisition of ChampionX, valued at $7.75 billion, has been delayed due to a request for additional information from the U.S. Department of Justice. Despite this, the company reported robust second-quarter earnings for 2024, exceeding expectations with an adjusted earnings per share of $0.85 and an adjusted EBITDA margin of 25%. A 5% quarter-over-quarter revenue growth across all regions was also reported.

Lastly, Schlumberger has secured substantial contracts, including a contract from Petrobras for Santos Basin development and a partnership with Aker Carbon Capture and CO280 Solutions Inc. for a large-scale carbon capture project at a pulp and paper mill on the U.S. Gulf Coast. These recent developments underscore Schlumberger's commitment to technological innovation and environmental sustainability.

InvestingPro Insights

To complement Bernstein SocGen Group's analysis of SLB's digital initiatives and strategic partnerships, InvestingPro data offers additional financial context. SLB's market capitalization stands at $60.05 billion, reflecting its significant position in the energy services sector. The company's P/E ratio of 13.66 suggests a relatively modest valuation compared to its earnings, which could be attractive to value-oriented investors considering SLB's digital transformation efforts.

InvestingPro Tips highlight SLB's financial stability and growth potential. The company has maintained dividend payments for 54 consecutive years, demonstrating a commitment to shareholder returns even as it invests in digital innovations. This consistency aligns with the company's forward-thinking approach discussed at the Digital Forum. Additionally, SLB's liquid assets exceed short-term obligations, indicating a strong financial position to support its digital and AI initiatives.

It's worth noting that SLB operates with a moderate level of debt, which could provide flexibility for future investments in technologies like the Lumi platform and partnerships with Aramco and NVIDIA. The company's profitability over the last twelve months and analysts' predictions of continued profitability this year suggest that SLB is well-positioned to fund its digital transformation strategy.

For investors seeking a deeper understanding of SLB's financial health and growth prospects, InvestingPro offers 8 additional tips, providing a more comprehensive view of the company's potential in the evolving energy sector.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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