Worth Their Weight in Gold? Potential Upside for Gold Stocks

(Continued from Prior Part)

We’ve analyzed the key operating and financial metrics for gold miners so far. Now it’s time to see the market sentiment for these companies. In this article, we’ll discuss analysts’ recommendations, target prices, and potential upside for gold miners.

Agnico Eagle Mines (AEM) and Goldcorp (GG) are analyst favorites. They have the highest percentage of “buy” recommendations at 80% and 79%, respectively. Kinross Gold (KGC) has the lowest percentage of “buy” recommendations at 25%. On the other hand, Barrick Gold (ABX) and Newmont Mining (NEM) have the lowest “sell” recommendations at 4%. Most analysts have “hold” ratings on these names.

Of the six companies, the EBITDA estimates for next year have only risen for Agnico and Newmont since the start of 2015. Barrick saw the largest fall in estimates at 30%. Goldcorp, Kinross, and Yamana Gold’s (AUY) estimates fell by 29%, 23%, and 19%, respectively.

Analysts are impressed by Newmont’s efforts at debt and cost reduction to face the volatile metals price environment. On the other hand, Agnico’s exploration potential amid slowing industry production growth and its strong balance sheet are keeping analysts bullish on the company.

Recently, research analysts at Macquarie upgraded Agnico from “hold” to “buy.” Canaccord Genuity reaffirmed its “buy” rating on AEM while increasing its target price from $49 to $51.

Investors who don’t want to pick up individual companies can invest in gold miners through the Market Vectors Gold Miners ETF (GDX). This ETF invests in senior and intermediate gold miners. Newmont forms 6.9% of its portfolio. The SPDR Gold Shares ETF (GLD) provides exposure to spot gold prices.

Continue to Next Part

Browse this series on Market Realist:

• Part 1 - Why Have Newmont and Agnico Outperformed?
• Part 2 - Gold Miners Are Cutting Down on Risky Geographical Exposure
• Part 3 - Why You Should Look Out for Gold Miners’ Commodity Exposure