This Energy Stock Tops My July Buy List

The U.S. and Iran are working toward a peace accord, and while that's good news in geopolitical terms, it's had the predictable impact of sending oil prices lower. Hopefully, those benefits will soon be passed along to local gas stations, providing some much-needed relief for drivers.

On the other side of the ledger, investors holding certain energy stocks amid the peace deal news are being reminded that oil equities can take away as quickly as they give. Perhaps even more so. Just look at oil services giant SLB (NYSE: SLB). Shares of the company formerly known as Schlumberger are sensitive to oil prices, but there occasions when that relationship diverges.

SLB stock is slumping, but the dip may be worth buying. Image source: Getty Images.

Down 18% over the past month, SLB is flirting dangerously with a bear market, but the stock's recent tumble may ultimately work in the favor of long-term investors. Hence, this name tops my July energy sector shopping list.

SLB can sizzle again

Over the near-term, this oil stock would benefit from steadiness in the crude market. If a peace agreement between the U.S. and Iran holds and oil shipments flow through the Strait of Hormuz in earnest, it's possible SLB stock benefits from normalization in the oil market rather than being beholden to sharp, headline-driven price swings.

Assuming that happens, there's a lot to like here, particularly from a long-term perspective. Interestingly, some of that thesis is tied to Iran, but it's not about oil's near-term gyrations stemming from conflict there. Rather, the constructive outlook on SLB is tied to postwar goings on in the region.

Geopolitical stability in the Middle East could spark a new wave of investment by SLB customers eager to up capacity there while embracing new technology. Some market observers believe those factors could send the stock to $80 over the long term, implying upside of about 70% from its June 25 price, according to Barron's. A portfolio manager interviewed by the publication says SLB can make a run at $90 as earnings accelerate.

Lasting peace in Iran and a more stable environment in the Middle East are material to SLB because the region accounted for a third of the company's 2025 revenue and 50% of its profits. Some SLB clients halted production when the war started, but if the peace deal holds, those exploration and production companies may be compelled to get back in the game, potentially supporting SLB stock.

The SLB tech angle

Let's keep it real. SLB is not a tech stock, but it's more "techy" than some investors may think. In fact, SLB has a freestanding digital division that's a cash cow. It generates over $1 billion in annual recurring revenue and is growing at an impressive 15% year over year.

What's interesting about SLB's digital business is that the company isn't hawking artificial intelligence (AI) or software to clients. Rather, SLB integrates AI, software, and other technologies into platforms to improve client outcomes.

Beyond the platform business, SLB's tech-centric digital exploration, operations, and professional services offerings open pathways to higher-margin, predictable revenue streams. In essence, SLB is focusing on less cyclical, higher-margin opportunities, and that transition is rooted in technology. That positions the company for long-term growth, suggesting the stock's recent pullback may be more of an opportunity than a cause for despair.

Todd Shriber has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.