Should You Invest in Shell?

PHOTO CREDIT: Royal Dutch Shell

OVERVIEW

Royal Dutch Shell plc. is a company based in the Netherlands. It is one of the world’s largest oil and gas companies. The company extracts crude oil and natural gas from several places around the world and transports these commodities to the market. The company also refines these products and retails them at thousands of outlets around the world. The company also produces some base petrochemicals. The company was founded in 1907.

Why You Should?

  1. Shell is a great reopening play in an investor's portfolio. This pandemic drastically reduced the demand for oil as people stayed indoors and did not travel, among other things. However, this demand will start to return as the world starts to reopen once again. This will benefit the company and will also boost investor confidence in the company and the industry.
  2. Shell can use its scale as one of the world’s largest oil companies. The company already has many revenue streams and has the ability to reinvest some of these profits in clean energy projects. Doing this will help the company cement itself in this changing industry. This opens up growth opportunities, something which will help the company and its investors.

Why You Should Not?

  1. The company’s revenues and profits are closely tied to oil prices around the world. The pandemic has demonstrated what low oil prices can do to the company’s balance sheet, operations, and company results. This has hurt the company’s numbers in the past as well. This will hurt the company and its investors.
  2. The COVID-19 pandemic has decimated the oil and gas industry as people stay home and do not travel anywhere. Factories and restaurants around the world which consume great amounts of oil and/or natural gas have also shut down as a result of this pandemic. This has hurt the company’s financial results and has also hurt the company’s stock price.
  3. Governments around the world have long been concerned about the impacts of climate change. The burning of crude oil for any purpose contributes to rising global temperatures and climate change. Governments around the world, including the Biden administration, might look to limit and further regulate the oil industry. This will hurt Shell and its investors.
  4. Oil is clearly not the future of the energy industry. Companies like Tesla have innovated in order to produce electric cars that can compete and outperform their gasoline counterparts. Other companies have also innovated in order to reduce the use of crude oil and/or gasoline in their products. This change in consumer trends might hurt the company and will also hurt investors in the future.
  5. Shell has tough competition from other large oil and gas companies around the world. These companies include Chevron, Exxon Mobil, BP, ConocoPhillips, and many others. This competition might hurt Shell’s growth and financial results in the future. This might also negatively impact investors.

MY OPINION

In my opinion, I think that there are better stocks to invest in. Shell is a great reopening play and can use its scale in order to innovate in the oil and gas sector. However, tough competition, government action against oil and gas companies, changing consumer trends, weak oil prices, and impacts from the COVID-19 pandemic might hurt the company in the future.

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Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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Aaditya Patel

Aaditya Patel

Aaditya Patel is a writer who publishes analysis on companies publicly traded on the NYSE. Follow him @the_investing787 on Instagram for summary posts.

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