Could Harmony Gold Regain Analysts’ Lost Favor?



Analysts’ recommendations for Harmony Gold

According to the consensus compiled by Thomson Reuters, Harmony Gold (HMY) has “buy” ratings from only 30% of the analysts covering the stock. While its percentage of “buy” ratings are in the bottom five for gold miners, analysts’ optimism for the stock has improved in the last year. A year ago, HMY stock had only 10% “buy” recommendations. The potential upside based on its target price and the current market price is 5%.

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Recent downgrades

So far in 2018, HMY has been downgraded by Deutsche Bank (DB) and Macquarie and upgraded by HSBC. The most recent rating change came from Macquarie, whose analyst Yatish Chowthee downgraded the stock from “neutral” to “underperform” on August 28.

As reported by The Fly, Chowthee cited the inflationary headwinds facing the South African gold mining sector for the downgrade. That’s particularly true of deep-level operators, including Harmony Gold and Sibanye Gold (SBGL). Chowthee favors geographically diverse operators and has maintained an “outperform” rating on AngloGold Ashanti (AU).

In April, Deutsche Bank downgraded HMY to a “sell” from a “hold.” As reported by The Fly, Deutsche Bank analyst Patrick Mann cited the recent rally in its stock as the reason. He also believes that the debt-funded acquisition of Moab Khotsong and a 7% lower Randgold price compared to a year ago create a downside risk for the stock. He continues to favor geographically diversified miners, including AngloGold and Gold Fields (GFI).

Stock sentiment

Despite these downgrades, HMY stock has shown strength in 2018. The stock has fallen just 1.1% year-to-date compared to a fall of 8.2% in the SPDR Gold Shares (GLD) and a 19.1% fall in the VanEck Vectors Gold Miners ETF (GDX). The company is transitioning to a positive earnings phase that might have helped the absolute stock sentiment.


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