Broker Says Santos is the Best ASX 200 Energy Share to Buy Now
If you’re looking to gain exposure to the energy sector, analysts at Morgans believe that Santos Ltd (ASX: STO) shares could be an excellent option. The company has been named on Morgans’ best ideas list for the second consecutive month, thanks to its gross profile and diversified earnings base.
Why Santos is Worth Considering
Morgans analysts believe that Santos is well-positioned to outperform during a potential sector recovery. The broker currently has an “add” rating on Santos shares, with a price target of $8.75, indicating a potential upside of over 15% in the next 12 months.
In addition, the broker is forecasting attractive dividend yields of 4.5% and 6.1% for the ASX 200 energy share in FY 2023 and FY 2024 respectively, with dividends estimated at 34.1 cents per share and 46 cents per share.
Factors Driving the Bullish Outlook
Morgans explains its bullish view on Santos based on the company’s resilience in terms of growth and diversified earnings. It believes that Santos‘ growth profile and diversified earnings base make it well-positioned to outperform, particularly with the potential for the Dorado project to provide attractive growth. Additionally, the recent acquisition of a larger stake in Darwin LNG has increased confidence in the development of the Barossa project.
Although there are some potential risks associated with the company’s growth in Papua New Guinea, Morgans still believes that Santos is a solid investment opportunity. The government’s desire to retain a larger share of economic rents and the operator Exxon’s deferred growth plans across its global portfolio present some uncertainties, but Morgans remains confident in Santos‘ prospects.
The Australian Energy Sector
The Australian energy sector has been facing several challenges, such as the transition to cleaner energy sources and the increasing scrutiny on greenhouse gas emissions. As a result, investing in energy stocks requires careful consideration of both the sector’s potential for growth and its ability to adapt to evolving market dynamics.
Santos, as an ASX 200 energy share, has demonstrated its ability to navigate these challenges, making it an attractive option for investors looking for exposure to the sector. The company’s diversified earnings base helps mitigate risks associated with specific energy sources and allows for more resilience in a changing market.
Editorial: Is Santos the Best Choice for Energy Exposure?
While Morgans analysts have highlighted Santos as the best ASX 200 energy share to buy, it’s important for investors to conduct their own due diligence before making any investment decisions.
Investing in the energy sector, like any other sector, carries inherent risks. Factors such as global oil prices, geopolitical tensions, and policy changes can greatly impact the sector’s performance and companies within it. Therefore, it’s crucial to have a comprehensive understanding of the company’s financials, competitive advantages, and strategic positioning.
Additionally, investors should consider their overall investment objectives and risk tolerance. The energy sector, while potentially offering significant upside, may also be subject to higher volatility compared to other sectors.
Looking Beyond the Short-Term
It’s important to remember that investing should always be a long-term strategy. Short-term market movements and recommendations may not align with an investor’s long-term goals and objectives. Therefore, it’s advisable for investors to consider their own investment horizon and consult with a financial advisor before making any investment decisions.
Ultimately, the decision to invest in Santos or any other energy company should be based on a thorough analysis of the company’s fundamentals and alignment with one’s investment strategy.
Conclusion: Santos Presents an Attractive Opportunity, But Proceed with Caution
While Morgans’ endorsement of Santos as the best ASX 200 energy share to buy now is certainly a positive signal, investors should approach the decision with caution. Conducting thorough research, assessing one’s own risk tolerance, and consulting with financial professionals are all crucial steps in making informed investment decisions.
Santos‘ gross profile and diversified earnings base offer potential upside, particularly in an energy sector recovery. However, it’s important to consider the broader market dynamics, regulatory changes, and the company’s ability to adapt to a transitioning energy landscape.
Investing requires a careful balance of optimism and caution. By considering these factors and conducting due diligence, investors can make informed decisions that align with their long-term investment objectives.
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