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What Made J.P. Morgan Upgrade Eldorado Gold?

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J.P. Morgan upgrades Eldorado Gold

J.P. Morgan (JPM) analyst John Bridges upgraded Eldorado Gold (EGO) on June 26 from “underweight” to “neutral.” As per the consensus compiled by Thomson Reuters, currently 13 analysts cover Eldorado Gold, out of which 38.5% rate it a “buy,” 38.5% rate it a “hold,” while 23% recommend a “sell” on the stock.

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EGO to benefit from business-friendly party

The stock suffered a great deal in 2017 and 2018 due to its standoff with the Greek government and some technical issues at its mines in Turkey. In Greece, specifically, the company has been struggling with permit delays for its Skouries projects for years.

As reported by Reuters, JPM believes that a win for New Democracy, a business-friendly party, in Greece snap elections should reduce the risks for Eldorado and could permit it to go ahead with the building of the mine. JPM also expects the current breakout of gold prices to support Eldorado Gold.

Eldorado’s impressive gains as gold breaks out

Eldorado’s stock has gained 98% YTD as of June 26. The majority of these gains have come in the last one month as gold prices have made the stock’s impressive run even better. In the last one month, the SPDR Gold Shares (GLD) has gained 11%, and the VanEck Vectors Gold Miners ETF (GDX), the leveraged bet on gold, has returned 25.5%. In addition to gold’s price movements, gold miners are also affected by company-specific factors. However, the price movements of miners depending on gold prices will also vary depending on their financial as well as operational leverage. EGO’s operational leverage made it a prime candidate for making a significant run when gold prices rose. In the last month, EGO stock has risen 83.3%.

You can read Gold Breaches $1,400: What’s the Next Stop? for a detailed discussion on gold’s drivers.

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