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Why Barrick Gold Has Lost Favor with Analysts

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Deteriorating sentiments for ABX

According to the consensus compiled by Thomson Reuters, 22 analysts are currently covering Barrick Gold (ABX), of which only 18% have recommended “buys” on the stock. This is the lowest percentage of “buy” recommendations among senior miner stocks (GDX).

Meanwhile, 68% of analysts have recommended “holds” on Barrick, and 14% have recommended “sells.” Its target price of $15.8 implies an upside of 19.3% based on its current market price.

Declining production profile

The company’s number of “buy” recommendations has fallen consistently over the last year. One year ago, 48% of analysts recommended “buys” on its stock.

While analysts are all praise for Barrick Gold’s significant deleveraging, the issues at its mines are persistent. Moreover, Barrick’s production profile is expected to be weak for the next few years. Its new production is expected to come online after 2021, until which it should see a fall in production growth. So even after the stock’s correction in 2018, analysts aren’t impressed by its flat to declining earnings growth going forward.

Some of Barrick close peers (GDX) (GDXJ), on the other hand, have rising or stable production profiles. Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Goldcorp (GG) boast strong production pipelines, which are not only expected to replace their maturing productions but also to contribute incremental volumes to their productions.

Resist the temptation

Barrick’s latest rating revision comes from Morgan Stanley (MS), which, according to Barron’s, said that investors should resist the temptation to “scoop up Barrick on the belief that it’s gotten too cheap.”

Morgan Stanley believes that Barrick’s underperformance will continue through the rest of this year ahead of its final agreement with the government of Tanzania. Morgan Stanley has downgraded Barrick from “equal-weight” to “underweight” and reduced its target price from $14 to $12.

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