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Yamana Gold: Why Wall Street Says ‘Buy’

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Mar. 26 2019, Updated 4:04 p.m. ET

Analysts’ recommendations

According to the consensus compiled by Thomson Reuters, 69% of analysts covering Yamana Gold (AUY) have recommended “buys” on its stock while the rest are divided equally between “hold” and “sell” ratings. AUY’s target price represents a potential upside of 27%, based on its current market price of $2.7.

Yamana’s analyst sentiment has improved over the last few months. At the end of November, it had “buy” ratings from 57% of analysts covering the stock. CIBC upgraded the stock from “neutral” to “outperform” in January.

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Price performance

Year-to-date as of March 25, Yamana Gold’s stock has gained 17%, outperforming the VanEck Vectors Gold Miners ETF (GDX), which has gained 10.3%.

Yamana’s Q4 2018 results were better than expected, beating both earnings and revenue estimates as production came in ahead of guidance and costs came in better than forecast.

Cerro Moro

Yaman’s Cerro Moro operation has been working quite well for the company and remains a game changer for Yamana. It’s expected to contribute significantly to Yamana’s production profile and cost reduction. After its full ramp-up in 2019, Yamana’s silver production should triple while it’s gold production should increase ~20% year-over-year.

Analysts are quite optimistic about the company’s Cerro Moro mine.

Yamana’s peers (GDX) are also trying to increase their profitable productions. Agnico Eagle Mines (AEM) has a strong organic growth production pipeline. The upside to Kinross Gold’s (KGC) production growth lies in its Tasiast Phase Two expansion. On the other hand, Barrick Gold (GOLD) has merged with Randgold Resources while Newmont Mining (NEM) has announced a merger with and Goldcorp (GG).

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