We recently published a list of 12 Most Promising Energy Stocks According to Analysts. In this article, we are going to take a look at where Shell plc (NYSE:SHEL) stands against other most promising energy stocks according to analysts.

With the world pivoting towards cleaner energy sources and facing political uncertainties, 2025 can be a critical year for the broader energy sector. As per GlobalData’s Power Predictions 2025 report, numerous themes are expected to shape the global power landscape in 2025. These include geopolitical shifts influencing supply chains, developments in EVs, energy storage, hydrogen, and nuclear power. As per the Short-Term Energy Outlook released by the US Energy Information Administration, the generation in the US electric power sector is expected to increase by 2% in 2025 and by 1% in 2026, after rising 3% last year, driven by growth in renewable energy sources.

What Lies Ahead for the US Energy Sector?

As per AXA Investment Managers, the combination of increased demand and supply constraints resulted in a favourable backdrop for the broader US renewable energy sector. Furthermore, the lower cost and environmental benefits of renewable energy are some positive factors. Trump’s return to the White House kicked off with several executive orders. Apart from announcing a national energy emergency, he ordered the withdrawal from the Paris Agreement on climate change and rolled back the clean energy initiatives.

Despite such announcements, AXA Investment Managers expects the US clean energy sector to have potential investment opportunities, considering the increasing power demand. The US power demand growth remained weak between 2000 and 2020, averaging 1%. However, it is projected to increase from 2024 onwards. As per the investment management firm, a 2% – 3% increase in the growth rate per annum will be significant, reflecting a doubling or tripling of the historical rate. The overall US power demand can grow at a CAGR of 3.1% between 2020 and 2040, against 0.1% between 2010 and 2020. This higher demand will be supportive of the long-term trend, with potential investment opportunities, from power companies to the ones involved in the energy and equipment supply chain.

READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.

Trump’s Deregulation To Be a Critical Growth Factor

One of the President’s priorities revolves around reducing government bureaucracy and inefficiency. Notably, permitting new energy projects remained slow over the past few years because of understaffed government departments and burdensome environmental criteria, opines AXA Investment Managers. In an executive order on “unleashing American energy”, Donald Trump is focusing on reducing official rules and processes that seem unnecessary, and accelerating energy projects, constraining the remit of the NEPA (National Environmental Policy Act). Interestingly, most of the permit requirements stem from this act.

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Overall, economics, growth and a continued climate of innovation and competition hint at the robust US power demand, which can also support the prospects of clean energy and its supply chains.

Our Methodology

To list the 12 Most Promising Energy Stocks According to Analysts, we used a screener to find companies catering to the energy sector. Next, we chose the ones that analysts see the most upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 12. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.

At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).Is Shell plc (SHEL) the Most Promising Energy Stock According to Analysts?

A gas refinery lit up against the night sky, showing the scale of the company's petrochemical operations.

Shell plc (NYSE:SHEL)

Average Upside Potential: 19.8%

Number of Hedge Fund Holders: 48

Shell plc (NYSE:SHEL) operates as an energy and petrochemical company. Despite the reduced earnings in Q4 2024, cash delivery was solid and the company generated FCF of $40 billion across the year, higher than in 2023, in the lower price environment. Shell plc (NYSE:SHEL)’s continued focus on simplification supported delivering more than $3 billion in structural cost reductions since 2022. The company’s focus on disciplined capital allocation drove down 2024 cash capex to $21.1 billion.

Shell plc (NYSE:SHEL) expects its cash capex range for the full year 2025 to be lower than its 2024 range. The company’s renewables and energy solutions consist of activities like renewable power generation, marketing and trading, optimization of power and pipeline gas, carbon credits, and digitally enabled customer solutions. Notably, the global demand for LNG is expected to see a strong rise in the next few years, reported Reuters while quoting the scenarios published by Shell plc (NYSE:SHEL).

The company’s diversified portfolio, including upstream, downstream, and integrated energy solutions, enables it to adjust to shifts in the overall energy demand. The energy sector continues to witness growth in energy storage technologies and digitalization of energy management systems. Shell plc (NYSE:SHEL) has been making investments in smart grids and energy storage solutions which can place it as a leader in the evolving energy ecosystem.

Overall, SHEL ranks 12th on our list of most promising energy stocks according to analysts. While we acknowledge the potential of SHEL as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for a deeply undervalued AI stock that is more promising than SHEL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap

Disclosure: None. This article is originally published at Insider Monkey.

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