Is now the time to buy gold stocks?
One of the catalysts behind investing in gold is that the precious metal has traditionally been considered a safe haven for investors in times of recession as it provides an effective hedge against inflation. Prices in the U.S. are staying stubbornly high, and the Federal Reserve has been aggressively hiking interest rates to counter the red-hot inflation.
In addition to this, the U.S. dollar has strengthened. And while the rally has by not been impressive by any means, it has still been meaningful. This has weighed on dollar-denominated commodities – including gold. Gold prices are down by about 5% in the past year. However, gold futures appeared to have stabilized hovering around the support price of $1,800 per ounce mark recently.
Will gold slide below this mark? Phillip Streible, chief market strategist at Blue Line Futures, believes that for many investors, "the gold price is falling to a major pain threshold. But the threat of a recession hasn't gone away. The Federal Reserve, with its aggressive monetary policies, is on track to break the economy, so gold's uptrend remains intact."
Marc Chandler, managing director at Bannockburn Global Forex, is of the opinion that gold prices are likely to fall to $1,800 an ounce over the near term. However, he adds that "buying [gold] on further weakness with a stop below $1,800 may offer an attractive risk-reward."
Any upside for gold from here would certainly benefit gold stocks and gold ETFs, both of which tend to move in tandem with the commodity.
Here, we explore five gold stocks that might be worth a closer look. To compile the list, we dug through the TipRanks database to look for gold stocks that have earned Moderate Buy or Strong Buy ratings from Wall Street analysts – and offer investors massive upside potential based on their consensus price targets.
Disclaimer
Data is as of March 6. Stocks are listed in reverse order of the amount of upside potential implied by TipRanks-surveyed analysts' consensus price targets.
Newmont
- Market value: $35.1 billion
- TipRanks consensus price target: $55.11 (24.6% upside potential)
- TipRanks consensus rating: Moderate Buy
Newmont (NEM, $44.22), founded in 1921, is a large producer of gold, copper, silver, zinc and lead. The company's mines span North and South America, Australia and Africa. The company has been in the news recently following a $16.9 billion bid for Australian-based mining company Newcrest. This deal has triggered a buzz in the gold mining sector regarding new M&A deals taking place.
As a part of this deal, Newmont has proposed exchanging 0.380 Newmont shares for every Newcrest share. The proposed deal, if concluded, will result in the combined company being 70% owned by Newmont and 30% owned by Newcrest.
Additionally, NEM recently reported fourth-quarter earnings. Newmont posted revenues of $3.2 billion in Q4, a 6% year-over-year decline due mostly to lower realized gold prices. Analysts were expecting revenues of $3.1 billion. Adjusted earnings came in at $1.85 per share versus $2.96 in the same period last year.
"Newmont safely delivered on our commitments in 2022 and finished the year from a position of strength, meeting our full year production guidance and generating $4.6 billion in adjusted EBITDA [earnings before interest, taxes, depreciation and amortization] and $1.1 billion in free cash flow," said Tom Palmer, CEO of Newmont, in the company's press release.
Newmont's average realized gold price per ounce dropped by $40 per ounce year-over-year to $1,758 per ounce in Q4, while attributable gold production stayed more or less flat at 1.63 million ounces versus 1.62 million ounces in the same period last year.
The company also suffered from rising all-in sustaining costs (AISC), up 15.1% year-over-year to $1,215 per ounce.
For fiscal 2023, the company has guided for production in the range of 5.7 to 6.3 million gold ounces, while AISC are only expected to increase further to be between $1,150 and $1,250 per ounce. More disappointing news for investors: NEM is targeting its annualized dividend payout to be in the range of $1.40 to $1.80 per share, a decline from $2.20 per share in 2022.
Still, TD Securities analyst Greg Barnes upgraded the stock to Buy from Hold following its Q4 earnings report, with a price target of $55 on the stock. The analyst's price target implies an upside potential of 24.4% at current levels.
Barnes is bullish about the prospects for one of Wall Street's best gold stocks following a roughly 18% price correction over the past month. The analyst remains confident that NEM will execute its Ahafo North and Tanami Expansion 2 projects on time and within the revised budgets. The company expects that this year and 2024 are likely to be the years when capex will be at its peak.
Overall, out of 10 analysts covering the stock, four analysts have rated NEM a Buy. TipRanks offers up a full analyst rundown of NEM shares.
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Barrick Gold
- Market value: $28.7 billion
- TipRanks consensus price target: $22.10 (35.6% upside potential)
- TipRanks consensus rating: Moderate Buy
Barrick Gold (GOLD, $16.30) is a Canadian mining company that produces gold and copper. It has operating mines and projects in 18 countries including Africa, Saudi Arabia, Papua New Guinea and North and South America.
Shares of GOLD have not fared well in the past month, down by about 13% after the miner said fourth-quarter revenues declined by 16.3% year-over-year to $2.77 billion, missing analysts' expectations by $20 million. However, the company's Q4 adjusted earnings per share (EPS) came in at 13 cents, beating Street estimates of 11 cents.
More encouragingly, GOLD's Q4 production rose 13% quarter-over-quarter to 1,120 thousand ounces at a realized gold price of $1,728 per ounce, while its ASIC costs trended lower to $1,242 per ounce versus $1,269 in the prior quarter.
In addition, the company announced a quarterly dividend of 10 cents per share. Barrick has also announced a new stock buyback program worth $1 billion. Last year, GOLD returned around $1.6 billion to its investors through stock buybacks and dividends.
For fiscal 2023, the company has projected production in the range of 4,200 to 4,600 thousand ounces, which is far better than a decline in production that GOLD has been facing over the past three years.
BMO Capital analyst Jackie Przybylowski still believes Barrick is one of the best gold stocks. This is evidenced by a Buy rating and a price target of $23 that implies additional upside potential of 41.1% to current levels. The analyst approves of the fact that GOLD is pursuing organic growth opportunities "that will continue to drive value and provide catalysts."
Indeed, the company's management stated on its Q4 earnings call that GOLD would be open to buying out Newmont's stake in its joint venture in Nevada Gold Mines.
As Barrick CEO Mark Bristow told Reuters, "I've always said that the best assets that we haven't got are the other parts of our joint ventures. If there was a way of acquiring those assets I think we would be desirous of acquiring them."
Overall, the Street is cautiously optimistic here, with six Buys and three Holds among analysts that have sounded off over the past three months. See the full rundown of analyst ratings for GOLD on TipRanks.
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Wheaton Precious Metals
- Market value: $18.7 billion
- TipRanks consensus price target: $47.73 (15.7% upside potential)
- TipRanks consensus rating: Strong Buy
Wheaton Precious Metals (WPM, $41.25) is a company that generates revenues primarily from the sale of cobalt and precious metals. WPM enters into precious metal purchase agreements (PMPA) to acquire "all or a portion of the precious metals or cobalt production from mines located around the globe for an upfront payment and an additional payment upon the delivery of the precious metal or cobalt."
In the third quarter, the precious metals delivered financial results in line with consensus estimates. Adjusted earnings came in at 20.8 cents per share, a decline of 31.6% year-over-year, but inline with estimates. Revenues fell 18.6% year-over-year to $218.8 million, but missed Street estimates by $17.2 million. The drop in revenues was a result of a 12% decline in the average realized gold equivalent price and a 7% decrease in the number of gold equivalent ounces (GEO) sold to 6,620 in Q3.
The company admitted that while inflationary pressures remain when it comes to mining, it continues to maintain "cash operating margins of over 75% year-to-date." WPM also declared a quarterly dividend of 15 cents per share.
In August 2022, WPM entered into an agreement with Glencore to terminate its silver stream on the Yauliyacu Mine in Peru for a net termination payment of around $136 million. As a result, Wheaton now anticipate average annual production for the five-year period ending December 31, 2026, to be approximately 800,000 GEOs, a reduction of 20,000 GEOs.
Top-rated Barclays analyst Matthew Murphy is sidelined on WPM stock with a Hold rating, but raised the price target to $42 from $40. The analyst stated that while the macroeconomic growth outlook remains better than expected, Murphy considers gold equities as a better hedge against economic upheavals than copper equities.
But Murphy is in the minority. WPM is the first of the Strong Buy-rated gold stocks featured here, thanks to eight Buys and just one Hold ratings among analysts who have released notes on the stock over the past three months. Check out other analysts' price targets and analysis for WPM at TipRanks.
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Osisko Gold Royalties
- Market value: $2.5 billion
- TipRanks consensus price target: $16.17 (19.7% upside potential)
- TipRanks consensus rating: Strong Buy
Osisko Gold Royalties (OR, $13.51) is based out of Canada. OR is a precious metal royalty company that "holds a North American focused portfolio of over 165 royalties, streams and precious metal offtakes."
There are several reasons why OR is on this list of the best gold stocks to buy, including its strong fourth-quarter results. Osisko reported Q4 revenues from royalties and streams of C$61.9 million versus C$50.7 million in the same period last year – year-over-year growth of 22.2%. Moreover, the company earned around 25,023 attributable GEOs in Q4, for a total of approximately 89,367 GEOs in 2022. This marked a 12% year-over-year increase, and a record when it comes to its quarterly and annual deliveries.
Adjusted earnings increased 35.7% year-over-year, while Osisko delivered a record quarterly cash margin of 92%. The company also raised its annual dividend by 4.8%.
Additionally, OR initiated its fiscal 2023 guidance and outlook for fiscal 2027 and now expects GEOs to range between 95,000 to 105,000 GEOs in 2023, with an average cash margin of 93%. When it comes to its outlook over the next five years, Osisko expects its portfolio to generate between 130,000 and 140,000 GEOs in 2027.
This guidance assumes that production will start at the San Antonio, Cariboo, Windfall and Back Forty projects. In addition, the company expects that "Mantos Blancos will have reached its nameplate capacity following the recent expansion of its activities, as well as increased production from certain other operators that have announced planned expansions."
Top-rated Canaccord Genuity analyst Carey MacRury is bullish on the stock with a Buy rating and a price target of $17.07. The analyst's price target implies an upside potential of 26.4% at current levels.
MacRury expects gold prices to be $1,862 per ounce, up from the record average of $1,802 per ounce last year. "These [macro] headwinds look to have largely run their course with inflation and the economy slowing," the analyst said. "Gold and gold equities have more room to run ahead of a potential Fed pause and with a non-trivial chance of a recession emerging."
Considering this scenario, the analyst anticipates Osisko to ramp up production by 37% from 2022 to 2027 as it begins output or increases it at its projects in San Antonio, Cariboo and Windfall.
MacRury isn't alone in his bullish outlook, with seven of eight analysts surveyed by TipRanks rating OR stock a Buy. See what else the pros have to say about OR on TipRanks.
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Agnico Eagle Mines
- Market value: $21.6 billion
- TipRanks consensus price target: $56.90 (20.3% upside potential)
- TipRanks consensus rating: Strong Buy
Agnico Eagle Mines (AEM, $47.32) is a Canadian gold mining company. Founded in 1957, AEM produces gold and silver from mines in Canada, Australia, Finland and Mexico.
The company currently has a pipeline of projects involved in exploring and developing existing mineral deposits in the U.S. and Colombia to improve the gold and silver production profile. However, Agnico Eagle Mines is primarily a gold producer.
Shares of AEM have not fared well in the past month, sinking by more than 12%, as the mining company warned of higher mining costs as a result of "inflationary pressures on labor, electricity, fuel and consumables."
The company has guided for total cash costs per ounce to be in the range of $840 to $890 in fiscal 2023, while AISC are likely to vary between $1,140 and $1,190 per ounce. This range is higher than AEM's previous guidance in the range of $725 to $775 and $1,000 to $1,050 for total costs per ounce and AISC, respectively.
Agnico anticipates total payable gold production this year to be approximately 3.24 to 3.44 million ounces, and is expected to increase further to around 3.35 to 3.55 million ounces in 2024 and 3.40 to 3.60 million ounces in 2025.
In Q4, AEM reported revenues of $1.38 billion, up 45% year-on-year. Still, this missed estimates by $1.41 billion. Adjusted earnings came in at 41 cents per share, inline with estimates. In addition, the company declared a quarterly cash dividend of 40 cents per share.
Top-rated Canaccord Genuity analyst Carey MacRury remains upbeat about AEM stock with a Buy rating and a Street-high price target of $66.80. The analyst's price target implies an upside potential of more than 41% for one of Wall Street's best gold stocks.
MacRury admitted that investors were likely to consider AEM's Q4 results as "disappointing," considering the company's gold production guidance for 2023 and 2024 was 6% below the analyst's forecasts and AEM's prior guidance.
However, "[t]he lower guidance reflects operational challenges and lower production levels at LaRonde and Macassa in addition to ongoing regulatory and legal restrictions at Fosterville and Kittila," the analyst said. "2023 cash cost guidance is about 9% higher than our forecast, as a consequence of inflationary pressures and reduced volumes."
All seven analysts surveyed by TipRanks categorize AEM stock as a Buy. Hear what else the pros have to say about AEM on TipRanks.
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