On Wednesday, Barclays (LON:BARC) adjusted its stance on Halliburton (NYSE: NYSE:HAL), shifting the stock's rating from Overweight to Equalweight and reducing the price target to $33 from the previous $43. The decision was driven by a reassessment of the oilfield services company's position within a slowing upstream spending cycle, which is anticipated to affect the industry through most of 2025.
Currently trading at $27.19, the stock has declined 23.19% year-to-date and is trading near its 52-week low. According to InvestingPro analysis, Halliburton appears undervalued based on its Fair Value calculation.
The analyst from Barclays highlighted that Halliburton, compared to its major competitors, has the highest exposure to global upstream spending and is significantly leveraged to oil prices. With oil prices expected to remain subdued for an extended period, the firm believes that the previous stock rating and price target no longer reflect the company's market prospects.
Despite market challenges, InvestingPro data shows the company maintains a GOOD overall financial health score, with strong profitability metrics including a P/E ratio of 9.44x.
Halliburton's role in advancing exploration and production (E&P) efficiencies was acknowledged, particularly its leadership in the electric fracturing (eFrac) buildout and its success in gaining market share with larger customers. Despite these strengths, concerns were raised about the sustainability of Halliburton's pricing premium, especially in light of projections that large cap E&P spending could decline by 9% in 2025.
The revised price target of $33 is based on a 7x multiple of the estimated 2025 EBITDA, which stands at $5,053 million, a slight decrease from the earlier estimate of $5,164 million. This new multiplier reflects a more conservative valuation to account for the anticipated downturn in upstream spending.
Barclays' reassessment of Halliburton's stock underscores the challenges faced by oilfield service providers as the industry adapts to changing market conditions and spending patterns in the energy sector.
In other recent news, Halliburton reported solid Q3 2024 results, despite facing several challenges. The company reported a total revenue of $5.7 billion, a slight 2% sequential decrease, and an adjusted operating margin of 17%. The oilfield services giant also saw a 4% year-over-year increase in international revenue, reaching $3.3 billion, while North America revenue declined by 9% year-over-year to $2.4 billion.
Despite a cybersecurity incident and severe weather conditions in the Gulf of Mexico, the impact on the company's financials was minimal, affecting only approximately $0.02 per share. Halliburton remains optimistic about its international business, expecting low to mid-single-digit growth in the international markets in 2025. The company also expressed confidence in its technology and innovation strategies, which it considers key to navigating the dynamic energy sector landscape.
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