With its overweight rating, Morgan Stanley (MS, Financial) initiated to cover Goldcorp Inc. (NYSE:GG) with a price target of $22 and in its report, the company seemed to prefer Goldcorp over Barrick Gold Corp. (NYSE:ABX) and Newmont Mining Corp. (NYSE:NEM).
Going forward, Morgan Stanley sees Goldcorp offering a better risk-reward outlook than Barrick and Newmont.
Morgan Stanley sees Barrick and Newmont being priced in gold well above spot. In regard to Barrick, the company says the market has already rewarded its improvements (debt load reduction, sale of non-core assets, production shrunk and costs lowered) and therefore it looks fairly valued (+190% YTD).
The firm rates Barrick and Newmont at equal weight, with a price target of $20 and $41 per share, respectively.
With its 62% gain year to date, Goldcorp Inc. is a laggard compared to its peers, Barrick at +185% and Newmont at +149%:
With gold trading higher, we can expect a further increase in the gold miner stock’s price, but Morgan Stanley sees a more upside in Goldcorp because “ its shares are pricing in gold below the strip, based on NAV; the company’s production guidance for 2016-2018 appears conservative; the company is less likely to commence work on a large greenfield project or make a big acquisition since it has steady medium term production and a large resource base and although Goldcorp is mining above reserve grade, the issue seems to be overblown.” (Benzinga).
Goldcorp Inc. is much cheaper compared to Barrick and Newmont, where the P/B ratio is considered, even though the EV/EBITDA is the highest:
| Stock | Enterprise Value/EBITDA | Price/Book (mrq) |
| NYSE:GG | 12.25 | 1.24 |
| NYSE:ABX | 8.51 | 3.48 |
| NYSE:NEM | 8.67 | 2.12 |
The following table shows the analyst price target for the 3 gold stocks:
| Stock | Average |
| NYSE:GG | $21.37 |
| NYSE:ABX | $23.31 |
| NYSE:NEM | $46.86 |
As of today, Goldcorp Inc. and Barrick Gold Corp. have a recommendation rating of 2.6 and Newmont Mining Corp. Ă‚ a rating of 2.5. The recommendation rating ranges between 1 (strong buy) and 5 (sell).
Disclosure: I do not have any positions in any stock mentioned in this article.
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