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Can Analysts Reconsider Goldcorp’s Ratings after Its Investor Day Outlook?

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Market sentiment

So far in this series, we’ve analyzed the key operating and financial metrics for Goldcorp (GG). Here, we’ll look at the market sentiment for Goldcorp and its peers. We’ll also look at analysts’ recommendations, target prices, and potential upsides for the stock.

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Ratings compared to peers 

Goldcorp has 60% “buy” recommendations from analysts. The “buy” recommendations for Newmont Mining (NEM), Yamana Gold (AUY), Kinross Gold (KGC), and Barrick Gold (ABX) total 63%, 53%, 33%, and 50%, respectively.

Analysts’ bullishness for Goldcorp has corrected sharply during the last year. At the beginning of 2016, 83% of analysts rated Goldcorp as a “buy.” In response to Goldcorp’s disappointing three-year forward production guidance and operational issues, analysts have pared back their estimates and ratings.

Analysts’ take

This should, however, change going forward as Goldcorp has provided a positive operational and financial outlook.

BMO Capital Markets downgraded Goldcorp from “outperform” to “market perform” in December. On December 19, 2016, BMO stated, “We are revising our metal price assumptions lower in a report entitled ‘2017 Outlook: A Much-Improved Backdrop for Most.’ In parallel with publication of the report, we are downgrading shares of Goldcorp to Market Perform (from Outperform), and lowering our target price to $15 from $23.”

On December 14, 2016, BMO Capital Markets reported, “We remain constructive on the outlook for Goldcorp longer term. However, in our view, shares of Goldcorp are unlikely to outperform the peer group until several key catalysts are delivered, which we do not expect until later in 2017.”

Barclays, on the other hand, includes Goldcorp among its top picks in the Americas. On December 14, 2016, Barclays noted, “The gold miner Goldcorp remains our Top Pick among North America Metals & Mining. In simple terms, GG is a prospective turnaround story with relatively inexpensive valuation among its peers.”

Citi expects only three miners—Polymetal International, Randgold Resources, and Goldcorp—to deliver positive production compound annual growth rates over the next five years.

National Bank Financial initiated its coverage on Goldcorp on September 7, 2016. The broker has an “outperform” rating on the stock with a target price of $25.5 Canadian.

Another way to gain exposure to precious metals is by investing in ETFs such as the Global X Silver Miners ETF (SIL) and the iShares MSCI Global Gold Miners ETF (RING).

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