The Shell (LSE:SHEL) share price has been on a bit of a downward trajectory over the last six months, falling by over 10%. It seems investors are becoming increasingly worried about falling oil prices as well as announcements from other industry titans like BP of weaker profits. In fact, BP recently announced a potential cut to its planned share buyback programme to reallocate capital towards debt reduction.

With that in mind, an investment in Shell doesn’t sound like a sensible idea right now. Yet digging into its latest results, it seems a very different picture’s being painted. In fact, while its latest quarterly earnings were down 3% year-on-year, that’s 12% ahead of what analysts were expecting.

Subsequently, dividends were maintained, and another $3.5bn of share buybacks was announced to be completed before the end of 2024. At the same time, Shell’s gearing dropped from 17% to 15.7%, thanks primarily to a $3.1bn reduction in net debt on the back of continued free cash flow generation.

Needless to say, pairing better-than-expected profits with a stronger balance sheet’s good news for shareholders. But in light of this performance, what are the experts predicting for the Shell share price over the next 12 months?

The forecast

The latest analyst predictions for Shell look very encouraging. While not everyone’s convinced, 14 of the 20 institutional experts have put the oil & gas giant into either Buy or Outperform categories. And looking at the 12-month share price forecasts, it’s not difficult to see why.

A prospective near-160% return would be awesome. But it also sounds a bit unrealistic, especially considering the projected double-digit decline of oil prices in 2025. Yet, while this is just one analyst’s opinion, the recent Trump victory in the US elections does bode well for Shell. After all, Trump’s promised a significant increase in US oil & gas production, potentially creating a vast array of new growth opportunities.

Furthermore, from a valuation perspective, Shell shares are currently priced relatively cheaper compared to its peers at a price-to-earnings (P/E) ratio of just 13.9 versus BP’s 29. And it’s no secret that buying cheap shares is a winning strategy for higher returns.

However, it’s important to remember that as a commodity-driven business, Shell doesn’t have any pricing power. And if projections for sliding oil prices prove to be true, the resulting drop in profits would naturally push Shell’s P/E ratio higher.

Time to buy?

As tempting as the growth opportunity appears, I’m personally not in a rush to start buying Shell shares right now. There are simply too many external uncertainties that can significantly impact the oil giant’s valuation, especially regarding the ongoing conflicts in the Middle East.

Instead, I’m allocating my capital to other promising investment opportunities.