How Are Analysts Rating Yamana after Its 3Q16 Results?

In the previous part of this series, we looked at Yamana Gold’s (AUY) free cash flow progression and outlook. As of October 28, 2016, Yamana was trading at $3.42 per share. We’ll now look at Wall Street analysts’ recommendations and target prices for AUY over the next year.

About 45% of Wall Street analysts covering AUY have given it a “buy” recommendation according to Bloomberg. About 45% of analysts have issued a “hold” recommendation, and only 9% have issued a “sell” recommendation.

Over the years, we’ve seen the company’s share price move in line with analyst recommendations. The consensus target price now stands at $6.2. Its highest target price of $7.5 comes from TD Securities. Goldman Sachs (GS) has the lowest target price for the stock at $3.9.

Among intermediate gold mining companies (GDX) (SGDM), Eldorado Gold (EGO) appears to be the analysts’ favorite, with the highest percentage of “buy” recommendations at 75%. IAMGOLD (IAG) has the lowest percentage of “buy” recommendations at 29%, and New Gold (NGD) has received 61% “hold” ratings.

Recently, J.P. Morgan (JPM) cut its target price for Yamana from $6 to $5. The firm’s analyst stated: “Given operational issues in 1H, we expect a stronger 2H, but delivering on guidance would need solid execution at multiple mines. Our revised 2016E/17E EBITDA estimates are $696 million/$914 million, -15%/-9%, versus earlier forecasts and -7%/in line versus consensus.”

RBC Capital Markets reaffirmed its “sector perform” rating on the stock on October 27, 2016, with a target price of $7. On October 18, 2016, TD Securities reiterated its “buy” rating on the stock and increased its target price from $6 to $7.5.

Credit Suisse cut its target price for Yamana Gold from $6.50 to $6.25 on September 7, 2016, while maintaining its “outperform” rating on the stock.

In July 2016, Credit Suisse provided a rationale for its “outperform” rating, stating: “We rate Yamana as ‘outperform’ due to its above average gold price leverage and our positive gold price outlook, potential balance sheet deleveraging and associated re-rating, potential for portfolio optimization, and exploration potential at Malartic and Chapada.”

In the next and final part, we’ll explore the valuation gap between Yamana and its peers and look at its catalysts in narrowing this gap.