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Why Have Analysts Turned Bearish on Barrick Gold?

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Mar. 22 2018, Updated 2:03 p.m. ET

Analysts’ ratings for Barrick

In this series, we’ll discuss analyst ratings and recommendations for gold miners, starting with Barrick Gold. Of the 24 analysts covering Barrick Gold (ABX), only 25% recommend “buy” for the stock, the lowest percentage of “buy” recommendations among senior miner stocks (GDX). Meanwhile, 69% of analysts recommend “hold” for Barrick, and 8% recommended “sell.” Its target price of $16.30 implies an upside of 33.0% based on its current market price.

The company’s “buy” ratings have fallen consistently over the last year. One year back, 48% of analysts recommended “buy.”

Barrick disappointed investors in 2017, mainly due to issues at its Tanzanian and Veladero mines. In contrast, Goldcorp (GG), Kinross Gold (KGC), and Newmont Mining (NEM) have been finding favor among analysts due to their increasingly attractive growth prospects.

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Recent analyst changes

It’s important to look at analyst ratings because they provide insight into the latest changes in market sentiment. On March 12, 2018, Royal Bank of Canada was upgraded from “sector perform” to “outperform,” and reduced ABX’s target price from $17 to $16. The upgrade was mainly based on the RBC analyst’s belief that the stock is oversold. He believes that ABX’s declining production profile and cost guidance have already been priced into its stock price.

On March 2, 2018, Argus downgraded Barrick from “buy” to “hold.” Argus analyst David Coleman stated that while there has been a sharp correction in the stock’s price, earnings are still likely to remain flat or decline further in coming quarters. In the long term, however, he expects the company’s earnings to recover thanks to higher gold prices and continued debt reduction efforts.

CIBC (Canadian Imperial Bank of Commerce) also downgraded ABX’s stock, from “outperform” to “neutral” on February 23, 2018. The downgrade was mainly due to its rich valuation and declining production.

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