JPMorgan Chase & Co. increased by 12.5% its price target for Goldcorp Inc. (GG, Financial) to $18 per share from a previous target of $16, according to TrueBlue Tribune.
With the research note dispatched on Nov. 15, JPMorgan has also kept its overweight rating on Goldcorp Inc.
This means that according to JPMorgan Chase’s opinion, Goldcorp Inc. is going to outperform most of its peers and the gold stock industry.
Year to date Goldcorp has underperformed the VanEck Vectors Gold Miners ETF (GDX, Financial) by 11%. The VanEck Vectors Gold Miners ETF is often used as a benchmark by gold stock investors..
This means that if Goldcorp is set to outperform the industry, the Canadian gold producer has to gain more than 11% on the VanEck Vectors Gold Miners ETF.
Goldcorp Inc. is currently trading at $13.24 per share, with a market capitalization of 11.47 billion, with a price-book (P/B) ratio of 0.85 versus an industry median of 2.01 and with an EV to Ebitda ratio of 8.91 versus an industry median of 10.14.
As of today, Goldcorp has an average target price of $17.38 per share, which represents a 31.3% upside from the current market valuation and has a recommendation rating of 2.4 out of 5.
Goldcorp’s Cerro Negro mine is a catalyst to the market value of this gold stock since, according to the World Gold Council, the mine is driving the company’s increase in the production of gold in Argentina.
Speaking in terms of total annual production for the entire year of 2017, Goldcorp issued guidance that it would milk from its gold reserves something between 2.735 million and 2.625 million ounces of gold.
Today gold is trading at $1,280 per troy ounce and seems to have decisively broken through $1,275 per ounce. This means that Goldcorp's volume of production with a rising gold price on the bullion market should lead to revenue of $3.47 billion for fiscal 2018, analysts predict.Â
From this top line, analysts expect the miner will drop – through its economics – to EPS of 43 cents at the bottom line of the 2017 income statement.
Also, an increase of 26% in the proven and probable mineral reserves of the Canadian miner to 53.5 million ounces should help Goldcorp to achieve its targets on production and all-in sustain costs that are targeted at $825 per ounce of gold sold.
Being on track to achieve 20% growth in production and reserves and 20% decline in costs in four years will for sure support the market value of Goldcorp. However, this is more for the long run than the short term.
The gold stock is currently trading below its 200-simple moving average (SMA) line and in line with the 50 SMA line. The RSI is 51.70 (-9%). The 52-week range is $11.91 to $17.87.
Disclosure: I have no positions in Goldcorp Inc.
