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How Are Analysts Rating Senior Gold Miners after 3Q16?

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Market sentiment

So far in this series, we’ve analyzed the key operating and financial metrics for gold miners. Here, we’ll look at the market sentiment for these companies. We’ll also look at analysts’ recommendations, target prices, and potential upsides for gold miners.

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Gold miners’ ratings

Among the senior gold miners, Newmont Mining (NEM) and Goldcorp (GG) are analysts’ favorites with “buy” ratings from 68% and 60% of analysts, respectively. Although analysts have turned more bullish on Newmont Mining since the start of 2016, their bullishness for Goldcorp has steeply corrected over the last quarter.

At the beginning of 2016, 83% of analysts rated Goldcorp a “buy.” In response to Goldcorp’s disappointing production guidance for the next three years, analysts have pared back their estimates and ratings.

Revision in target prices

Newmont Mining (NEM) has seen an upward target price revision of 90% since the start of 2016. This is mainly due to its improvement in financial leverage and overall higher gold prices. Goldcorp and Newmont Mining also have the lowest percentage of “sell” recommendations at 4% and 0%, respectively.

Kinross Gold (KGC) has the lowest percentage of “buy” recommendations at 33%. Its target price, however, has seen a steep correction year-to-date of 116% to $5.60 compared to $2.60 at the beginning of 2016. Most of the upward revision is due to higher gold prices and the company’s higher leverage to gold prices.

Analysts are impressed with Kinross’s recent announcements regarding the Tasiast expansion, its cost-cutting initiatives, and the company’s outlook. On the other hand, Goldcorp’s disappointing production and cost performance going forward have led analysts to cut estimates for the company.

About 41% of analysts recommend a “hold” for Yamana Gold (AUY). Its target price of $6.40 implies an upside potential of 98%.

Investors who don’t want to select individual companies can invest in gold miners through the VanEck Vectors Gold Miners ETF (GDX) or the VanEck Vectors Junior Gold Miners ETF (GDXJ). These ETFs invest in senior and intermediate gold miners. Newmont Mining forms 6.9% of GDX’s portfolio.

The SPDR Gold Shares ETF (GLD) provides exposure to spot gold prices.

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