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Can South African Gold Miners Continue at a Discount to Peers?

PART:
1 2 3 4 5 6 7
Part 6
Can South African Gold Miners Continue at a Discount to Peers? PART 6 OF 7

Analysts’ Take on South African Gold Miners

Market sentiment

So far in this series, we’ve analyzed the key operating and financial metrics for gold miners. Now let’s look at the market sentiment for these companies. In this part, we’ll discuss analysts’ recommendations, target prices, and any potential upside for gold miners.

Analysts’ Take on South African Gold Miners

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South African gold miners’ ratings

Among South African gold miners, AngloGold Ashanti (AU) is analysts’ favorite. It has the highest percentage of “buy” recommendations at 53.0%. Harmony Gold (HMY), on the other hand, has the lowest percentage of “buy” recommendations at 10.0%. It’s followed by Sibanye Gold (SBGL) and Gold Fields (GFI) with 36.0% “buy” recommendations each. The above graph shows brokers’ recommendations and the percentage of upsides or downsides from the current prices.

Change in ratings and target prices

Sibanye Gold’s target price represents the highest potential upside of 130.0%. Harmony Gold, AngloGold, and Gold Fields all represent potential upsides of more than 70.0% each. Stocks of gold companies corrected after Donald Trump won the US presidential election in November and after the Fed hiked interest rates last week. But analysts’ target price changes haven’t followed the same pace.

Harmony Gold stock has risen the most in 2016. Due to its increased leverage and higher gold prices, analysts have increased their target prices for the stock by 149.0% since the beginning of the year. Sibanye Gold has seen an upward revision of 63.0% in its target price since the start of the year. AngloGold and Gold Fields have seen lower target price rises of 52.0% and 22.0%, respectively, since they have less exposure to South Africa.

You could consider the VanEck Vectors Gold Miners ETF (GDX) and the SPDR Gold Shares (GLD) to get exposure to gold miners and spot gold prices. AngloGold Ashanti forms 4.5% of GDX’s holdings.

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