HSBC Downgrades Shell to Hold, Flags Rising Debt and Weaker Trading Outlook.

HSBC has downgraded Shell from Buy to Hold due to concerns over rising net debt and weaker trading outlook. The bank expects Shell's net debt to climb to over $60 billion by 2027 and its trading division to normalize, dragging down returns. HSBC trimmed Shell's 2025-2027 earnings and cash flow forecasts by 4-5%. Shell trades at a premium to peers but has a lower yield and similar debt profile. The bank nudged its price target slightly higher to $3,747 but made clear that the upside is limited and conditional.

HSBC has downgraded its rating on Shell (NYSE: SHEL) from Buy to Hold, citing concerns over rising net debt and a weaker trading outlook. The bank expects Shell's net debt to climb to over $60 billion by 2027 and anticipates that its trading division will normalize, potentially dragging down returns. HSBC has trimmed Shell's 2025-2027 earnings and cash flow forecasts by 4-5% [1].

Shell trades at a premium to peers but offers a lower yield and a similar debt profile. HSBC has nudged its price target slightly higher to $3,747, but it made clear that the upside is limited and conditional. The bank's downgrade reflects a more cautious stance on Shell's future performance, particularly in light of the company's recent stock buyback plan, which suggests that the board believes its shares are undervalued [1].

Shell recently reported earnings per share (EPS) of $1.42, surpassing estimates, but revenue fell short at $66.44 billion. The company has initiated a $3.50 billion stock buyback plan, indicating that the board is optimistic about the stock's value [1]. Despite the downgrade, Shell continues to maintain a consensus rating of "Moderate Buy" with a target price of $78.64, reflecting a range of analyst opinions on the company's future prospects [1].

Institutional investors have been active in Shell's stock, with several large investors increasing their stakes. For instance, GQG Partners LLC lifted its stake by 42,743.3% during the first quarter, owning 2,867,929 shares worth $210,162,000 [1]. These moves highlight the continued interest in Shell's stock despite the recent downgrade.

References:
[1] https://www.marketbeat.com/instant-alerts/hsbc-reaffirms-hold-rating-for-shell-nyseshel-2025-08-04/