Is Santos a buy, hold, or sell after its big fall? Latest big broker recommendations

Santos (ASX: STO) shares slumped more than 10% yesterday after the XRG consortium scrapped its $36 billion takeover bid for the ASX listed oil and gas producer. The abrupt exit left Santos investors jilted for the second time in two years, and nursing a big loss in the value of their shares as investors quickly dismantled its takeover premium.

For readers seeking the full story of how and why the deal collapsed, please refer back to yesterday’s article, but in short:

• XRG walked away citing “a combination of factors.”
• Santos confirmed no issues were found in due diligence.
• Disputes over risk allocation, regulatory approvals, and domestic gas commitments scuppered the two reaching a binding agreement.
• Shares have fallen back to ~$6.80, well below the $8.89 indicative offer and even lower than where they were trading pre-bid.

Aussie investors love a bargain – and Santos’ +10% free fall in the last 24-hours could represent a major buy the dip opportunity. In this article, we’ll explore the latest research from several major investment banks to help you answer the burning question: Are Santos shares a buy, hold, or sell?

Immediate broker reactions

Citi – Retained Buy rating, Target Price unchanged at $8.70

• Notes: “The XRG withdrawal creates fresh questions around STO’s strategic pathway after three failed approaches since 2018.”
• But maintains a constructive stance, forecasting a total return of ~17.5% over the next 12-months.
• With event driven traders likely now departed, sees shareholder rotation as pivotal, with “the pace of long-only re-entry” likely to dictate where shares reset.
• Highlights improved cash flow visibility and growth project de-risking since June.
• Risks remain around PNG LNG, Barossa completion, and soft oil demand in 2025.

Evans & Partners – Retained Neutral rating, Valuation unchanged at $8.10

• Retains Neutral rating citing ongoing doubts after yet another failed deal.
• Notes FIRB and political risks were always high, reinforcing why the firm downgraded its rating when the bid was first announced (great call E&P!).
• Sees risk-reward improving with Barossa and Alaska poised to transform cash generation, notes, “Once the dust settles, it is likely an interesting opportunity may be forming. Santos has been delivering on its growth projects, with Barossa + Alaska to transform its free cash generation and set the business up”

Jarden – Downgrades rating to Underweight (from Overweight), Target Price cut to $7.05 (from $8.40)

• Responded to the withdrawal by cutting its rating to a more cautious stance.
• Warns that the market will scrutinise Santos’s board and its handling of negotiations.
• Expects near-term share price weakness before any recovery can set in.
• Believes investor focus will now shift back to core LNG and oil operations.

Morgan Stanley – Retains Equal-weight rating, Target Price cut to $7.00 (from $8.88)

• Reverts to a fundamental DCF valuation now that “corporate premium has evaporated”.
• Sees STO fairly valued around $7.00 with no discount or premium applied.
• Expects near-term volatility as markets digest the failed deal.
• Notes strong free cash flow yield and a resilient balance sheet as support.
• Barossa first gas (Q3/25) and domestic gas policy reviews flagged as key catalysts.
• Concludes: “We see Santos as fairly valued at these levels, with no discount or premium applied.”

Ord Minnett – Upgrades rating to Buy (from Accumulate), Target price cut to $8.35 (from $8.89)

• Sees collapse as an opportunity: no portfolio valuation or liability concerns arose during due diligence.
• Believes regulatory and political hurdles were the only stumbling blocks.
• Screens STO as undervalued on earnings multiples.
• Forecasts attractive dividends from 2025, rising further as new production ramps.
• Argues the share price weakness should be used as a buying opportunity.

The new consensus