Why Analysts’ Sentiments Are Turning Positive on IAMGOLD

Analysts’ ratings for IAG

Analysts’ sentiments toward IAMGOLD (IAG) have been changing for the better in the past few months. Currently, the stock has “buy” recommendations from 83% of the analysts covering it. The rest have given it “hold” recommendations.

Why Analysts’ Sentiments Are Turning Positive on IAMGOLD

IAG has seen a significant turnaround in terms of analysts’ sentiments. Until about a year ago, only 54% of analysts were recommending “buys” on the stock. Its target price of $7.60 implies a potential upside of 125%.

Among IAG’s close peers (GDX) (NUGT), Agnico Eagle Mines (AEM) has 83% “buy” ratings, while Yamana Gold (AUY), Eldorado Gold (EGO), and New Gold (NGD) have “buy” ratings from 57%, 23%, and 0% of analysts, respectively.

Deferring Côté Gold

Yesterday, IAMGOLD announced that it would be deferring its decision to proceed with the construction of its Côté Gold project in Ontario, Canada. IAG’s CEO, Steve Letwin, said in a press release, “We have substantially de-risked the Côté Gold Project.” He added, “However, we have decided to wait for improved, and sustainable, market conditions in order to proceed with construction.”

Currently, investors and analysts are more concerned about companies focusing on maximizing shareholder returns than increasing production at any cost. Moreover, many of the projects undertaken are turning out to be risky and return-negative. Thus, the company’s decision came as a relief for investors and analysts alike. IAG climbed more than 9% on January 28.

Analyst upgrades

Yesterday, BMO Capital Markets upgraded IAMGOLD from a “market perform” to an “outperform” and increased its target price from $3.75 to $5.0. Desjardins also upgraded the stock from a “hold” to a “buy” on January 28. Both analysts like the company’s risk profile after its announcement of its decision to defer the Côté Gold project.

On January 22, Macquarie upgraded IAG from a “neutral” to an “outperform.” On December 19, Credit Suisse (CS) also upgraded IAG from a “neutral” to an “outperform.” It also increased the stock’s target price from $6 to $6.5.

Apart from the latest catalyst, analysts also like IAG’s leverage to gold prices, which could substantially benefit the stock in a rising gold price (GLD) environment. Moreover, the company has been adding reserves organically, which is positive for its stock.

Read Which Five Gold Stocks Are Analysts Loving So Far in 2019? for more on analysts’ favorite gold equities.