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What Does Wall Street Have to Say about Gold Mining Companies ahead of 2Q16 Earnings?

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Nov. 20 2020, Updated 2:24 p.m. ET

Market sentiment

Analyst recommendations and ratings are some of the most important market sentiment indicators investors can look at. Ratings reflect how bullish or bearish analysts are on a particular company or industry.

At the extreme, market sentiment could be an indicator of a change in direction going forward. Generally, when everyone is bearish and dumping stocks, it could mean a bottom and better times ahead, and vice versa.

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Paring back expectations

Among the senior gold miners (GDX), analysts are most bullish about Agnico Eagle Mines (AEM). Analysts have given AEM 48% “buy” ratings and 10% “hold” ratings.

While Agnico remains the stock with the most “buy” ratings in the intermediate space, its popularity among analysts has fallen drastically since the start of 2016. It had 80% “buy” ratings and only 8% “sell” ratings at the start of 2016.

Goldcorp (GG) comes second to Agnico, with 43% of 21 analysts recommending “buys.” But even for Goldcorp, analyst bullishness has steeply corrected over the last half year. At the beginning of 2016, 83% of analysts rated Goldcorp as a “buy.”

In response to Goldcorp’s disappointing production guidance for the next three years, analysts have pared back their estimates and ratings. In the senior and intermediate gold mining space, Goldcorp has been a laggard.

By comparison, 45% of analysts recommend “holds” for Yamana Gold (AUY). Its target price of $5.3 implies a downside potential of 6.4%. After a very strong run for the stock, analysts have pared back their expectations.

Upward revision in target prices

Barrick Gold (ABX) has a consensus “hold” rating, with 48% “hold” ratings and 40% “buy” ratings. This stock, however, has seen one of the largest upward revision of its target price among its peers. Since the beginning of 2016, its target price has risen 117% to $20.

Newmont Mining (NEM) has 37% “buy” ratings and 53% “hold” ratings. While its ratings have remained more or less constant since the start of 2016, its target price was revised upward by 73% to $40.

Analyst opinions are also tilted toward a “hold” for Kinross Gold (KGC) as well, with 57% of the analysts covering the stock rating it as “hold. Its target price is $5.38, which represents a rise of 122% year-to-date.

In the next part, we’ll go deeper into the reasons behind these analyst revisions in 2016.

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