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How Analysts View Barrick Gold after the Randgold Acquisition

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Analysts’ ratings for Barrick

Of the 21 analysts covering Barrick Gold (ABX), only 14.0% recommend a “buy” for the stock, the lowest percentage of “buy” recommendations among the senior miner stocks (GDX). About 76.0% recommend a “hold,” and 10.0% rate it as a “sell.” Its target price of $14.20 implies an upside of 25.0% based on its current market price.

The company’s “buy” ratings have fallen consistently over the last year. One year ago, 42% of analysts recommended a “buy.”

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Decline in analysts’ optimism

The decline in analysts’ optimism is mainly due to consistent issues at some of its mines. Also, Barrick’s production profile is expected to decline for the next few years. Its new production is expected to come online after 2021, but until then, its production growth is expected to fall.

In contrast to Barrick’s production growth, some of its close peers (GDX)(GDXJ) have rising or stable production profiles. Newmont Mining (NEM), Agnico Eagle Mines (AEM), and Goldcorp (GG) have strong production pipelines, which are not only expected to replace their maturing productions but also to contribute incremental volumes to their productions.

Acquisition of Randgold Resources

On September 24, Barrick Gold agreed to acquire Randgold Resources (GOLD) in a share-for-share deal. The merger would create an industry-leading gold company (GDX) with the greatest concentration of Tier 1 gold (GLD) assets. The acquisition should provide a much-needed catalyst for ABX stock.

After the deal was announced, Barrick received two upgrades from Citi and TD Securities, which believe the merger could provide credibility to Barrick’s turnaround.

In the next part, we’ll look at the analysts’ estimates for revenues and earnings.

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