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Why Analyst Sentiment Is Diverging for ABX and NEM

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Analysts’ ratings for ABX and NEM

In this article, we’ll discuss analysts’ ratings and recommendations for Barrick Gold (ABX) and Newmont Mining (NEM). Of the 24 analysts covering Barrick Gold, 25.0% recommended a “buy” for the stock, the lowest percentage of “buy” recommendations among the senior miner stocks (GDX). Newmont Mining has “buy” ratings from 56.0% of the 18 analysts covering it.

Barrick Gold’s “buy” ratings have fallen consistently over the last year. One year ago, 48.0% of analysts recommended a “buy.” This rating disappointed investors in 2017, mainly due to issues at Barrick Gold’s 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.

Barrick Gold’s target price of $16.30 implies an upside of 33.0% based on its current market price. NEM’s target price implies an upside of 17.0% based on its current market price of $37.50.

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RBC: Buy ABX, sell NEM

On March 12, 2018, Royal Bank of Canada upgraded ABX from “sector perform” to “outperform” and reduced its target price from $17.00 to $16.00. The upgrade was primarily based on the analyst’s belief that the stock is oversold. The analyst believes that ABX’s declining production profile and cost guidance have already been priced into its stock price.

In the same report, RBC downgraded Newmont Mining to “underperform” from “sector perform” and cut NEM’s stock target price by $1.00 to $43.00. While RBC upgraded Barrick Gold due to its attractive valuation, it cut Newmont Mining for the same reason. Royal Bank of Canada believes that while NEM has executed its business plan well, it might be time to take profits in the stock after its recent rally.

Rating changes

In 2018, Barrick Gold (ABX) has seen two downgrades and one upgrade while Newmont Mining has seen two downgrades. Newmont Mining’s downgrades are primarily due to analysts’ concerns regarding its richer valuation.

In the final part of this series, we’ll look at the forward valuation for these two stocks. We’ll also examine the positive and negative catalysts, which could impact these valuations going forward.

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