Canadian gold miner Goldcorp Inc. (GG, Financial) was downgraded by HSBC Holdings to hold from a previous rating of buy.
According to a research note dispatched by the British firm on Nov. 22, HSBC has set a new target price of $14.80 per share, a 16.9% decrease from the previous target price of $17.30.
Botir Sharipov, an analyst at HSBC, said he believes 2018 “is fraught with risks as the Canadian miner attempts to meet several of its key milestones after years of large investments.”
The stock's average target price, which is $17.28, was also affected by the new rating.
Following HSBC’s downgrade, the stock lost 1% on the New York Stock Exchange and is currently trading around $13.36 per share.
The average target price still represents a hefty 29.3% upside in the current market value of the Canadian miner. With a recommendation rating of 2.4 out of 5, Goldcorp is considered one of the gold stocks that will benefit the most from rising gold prices.
Gold has reached $1,290.50 per troy ounce on the London Bullion Market. Macro-factors, which are usually supportive of the metal, suggest the positive trend in the commodity is not over. In addition, the odds of the bullion finally breaking through $1,300 per ounce are high.
The higher the metal averages over the fourth quarter, the better it is for Goldcorp’s economics, which are dependent on operations.
HSBC’s downgrade determined another pullback in the share price of Goldcorp, which is trading at one of its lowest points so far this year, as illustrated in the chart below.
The gold stock is trading below its 200-day simple moving average line and 35.8% below its 52-week high of $17.87. The 52-week low is $11.91.
In a previous article on Goldcorp, I suggested to either start a position or increase an existing one. Today, I reinforce my thesis with the support of another catalyst.
Another catalyst is represented by an eventual increase in the royalty rate for the metal produced and sold in Brazil.
Since the Canadian miner does not have assets in Brazil, analysts will look at Goldcorp more favorably with positive impacts on its market value should the royalty rate proposal be passed by Brazilian lawmaers. The vote is expected by Nov. 28.
Disclosure: I have no positions in Goldcorp Inc.
