Morgan Stanley announced that it has lowered by $1 its price target on shares of the world's largest gold producer, Barrick Gold Corp. (ABX, Financial).The U.S. financial services company has set the price at $15 a share.
The Canadian mining company's rating is maintained at Equal-Weight, as part of a decision that may have been triggered by a series of factors, which have made the Canadian miner less appealing compared to a few months ago.
The miner predicts a tough first quarter of 2018: Barrick Gold Corp, as anticipated in its full year and fourth quarter report for fiscal 2017, predicts a spike in costs because of lower grades of mineral, which will be processed at Cortez and Goldstrike properties in Nevada. Planned maintenance timing at its Pueblo Viejo mine, jointly operated in the Dominican Republic with Goldcorp (GG) is also going to impact costs.
In 2018, the miner is facing lower gold production from operations at Veladero (jointly operated in Argentina with Shandong Gold Group), at Barrick Nevada and Pueblo Viejo. It is also facing higher costs as a result of its 63.9% stake in Acacia (gold mining activities in Africa). Those activities have produced a higher guidance on costs and a lower one on the gold production for the entire year of 2018.
For 2018, Barrick Gold Corp forecasts a gold production of 4.5 million to 5 million ounces (-15.4% to -6% from 2017 gold output level) at a cost of sales applicable to the yellow metal of $810 to $850 per ounce (+2% to +7% from 2017) and at an all-in sustaining cost (AISC) of $765 to $815 per ounce of gold sold (+2% to +8.7% from 2017).
Morgan Stanley’s new price target will drag the average target price per share of Barrick Gold Corp. down at around $16.43 from a previous mean of $16.50 per share.
The mean will be a result of 22 estimates of analysts who have been surveyed to date, including Morgan Stanley. The limits of this range will remain at $13 (low estimate) and $20.35 (high estimate).
The recommendation rating on Barrick Gold is 2.8 out of a total of 5. As of March 1, 15 of 24 analysts suggest holding Barrick Gold, four rate it a buy and another four rated it a strong buy.
Barrick Gold Corp is currently trading at $11.52 per share and has lost 36% for the 52-weeks through Feb. 27, underperforming the Van Eck Vectors Gold Miners EFT (GDX) by 33%.
Some other indicators on Barrick Gold Corporation:
· The stock is trading plainly above the 200, 100 and 50-SMA lines.
· The 52-weeks range is $11.51 to $20.36 per share.
· The market capitalization is approximately $13.37 billion.
· The price-book (P/B) ratio is 1.45 times versus an industry median of 2.05 times.
· The EV-to-Ebitda ratio is 3.83 times versus an industry median of 10.18 times.
· The Ebitda margin (ttm) is 59.8% versus an industry median of 23.7%.
· GuruFocus assigns a financial strength rating of 5 out of a total of 10.
· The Relative Strength Indicator (RSI 14-days) is 26.44 of a 30 to 70 range.
(Disclosure: I have no positions in any security mentioned in this article.)
