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Interpreting Analyst Recommendations for Intermediate Gold Miners in 2015

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Analyst ratings

Previously in this series, we analyzed the key operating and financial metrics of six intermediate gold mining companies. Now let’s look at the market sentiment for gold miners.

Generally, investors look at consensus ratings and guidance before investing in any company. Analyst ratings are very important, in this sense, as they change the perception of investors and impact share prices. In this part of our series, we’ll discuss analyst recommendations, target prices, and potential upsides for gold miners.

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Gold miner ratings

Intermediate gold mining companies—despite the industry downturn—such as Anglogold Ashanti (AU), Eldorado Gold Corporation (EGO), Gold Fields (GFI), Sibanye Gold (SBGL), Tahoe Resources (TAHO), and Agnico Eagle Mines (AEM) have been doing well among Wall Street analysts, with more than 40% of analysts issuing “buy” recommendations for these gold miners.

Here’s a breakdown of analyst recommendations for the above six gold mining companies:

  • Gold Fields has the lowest percentage of “buy” recommendations at 40%. It has the highest “sell” percentage recommendations at 40%.
  • Nobody has recommended a “sell” for Sibanye Gold, but Sibanye has the lowest upside at 1%.
  • Anglogold has a potential upside of 13% with 50% “buy” and 17% “sell” recommendations.
  • Agnico Eagle offers an upside of 9%, with a high 74% of “buy” recommendations.
  • Eldorado faired average among analyst as it has 48% of buy recommendation ranking, with a potential upside of 12%.

Tahoe Resources appears to be a favorite among analysts because it had the highest percentage of “buy” recommendations at a whopping 86%. With its high ranking among analysts, Tahoe Resources has the highest potential upside of 49% based on its current market price and average target price.

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Chances in analyst rankings and target prices

Here’s a further breakdown of updated analyst recommendations and target prices:

  • Morning Star has downgraded Anglogold’s recommendation from “buy” to “hold.” JPMorgan reduced its target price for Anglogold’s stock from $18 to $15. This is due to the company’s asset sales and higher debt.
  • Raymond James upgraded Agnico to “outperforming” from “strong buy,” increasing the company’s target price from $31 to $34. UBS too increased its target price from $33 to $35.
  • Macquarie increased Eldorado’s target price from $4.7 to $5.8 with the same rating of “outperform.”
  • Macquarie and Dundee Securities maintained their respective “outperform” and “buy” ratings for Tahoe Resources. However, they reduced the company’s target price marginally.
  • JP Morgan downgraded Gold Fields’ rating from “neutral” to “underweight” and reduced the company’s target prices from $4.8 to $3.6.

Analysts’ reduced 2015 EBITDA guidance

Wall Street analysts have reduced their 2015 EBITDA guidances for Tahoe Resources by 8%, Eldorado by 5%, and Agnico by 2%. Anglogold’s, Gold Fields’, and Sibanye’s EBITDA guidances remained almost the same.

Investors can invest in the VanEck Vectors Gold Miners Index (GDX) and the SPDR Gold Trust (GLD) to get exposure to gold miners and spot gold prices, respectively.

Continue to the next and final part of this series for an evaluation of these intermediate gold mining companies’ current valuations in 2015.

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