3 Buy the Dip Gold Stocks Wall Street Predicts Will Rally by More Than 45%

Fears surrounding the fast-spreading COVID-19 Delta variant and its potential impact on economic recovery have boosted the safe-haven appeal of gold. This, along with an increased interest in safe-haven metals amid geopolitical tensions caused by the collapse of the Afghan government, makes Wall Street analysts bullish about gold stocks Sibanye Stillwater (SBSW), Kinross Gold (KGC), and Eldorado Gold (EGO).They are each currently trading significantly below their 52-week price highs. And analysts believe these stocks could rally by more than 45%. So, let’s discuss.

As the resurgence of COVID-19 cases continues to heighten investors’ concerns that the unabated pandemic will threaten the global economic recovery, the spot gold price retreated slightly this week after hitting its highest level since August 6, 2021, at $1,795.25. But the safe-haven metal continues to hover near the two-week high, with investors awaiting the minutes of the Federal Reserve’s July policy meeting for cues on its tapering plans.

Although a stronger U.S. dollar, given the hawkish outlook for U.S. monetary policy, combined with an improvement in real yield could mean more downside for gold, Jeffrey Halley, a senior market analyst, Asia Pacific at OANDA, believes “the elephant in the room is this Delta variant.” Therefore, “gold is likely to find more haven buying.” Moreover, the geopolitical tensions related to the collapse of the Afghan government could further boost the yellow metal’s safe-haven appeal.

Amid this environment, Wall Street analysts remain bullish about prominent gold mining stocks Sibanye Stillwater Limited (SBSW), Kinross Gold Corporation (KGC), and Eldorado Gold Corporation (EGO). These stocks are currently trading significantly below their 52-week highs. And given the expected increase in demand for safe-haven assets, analysts expect these stocks to rally by more than 45% in the near term.

Click here to check out our Gold and Silver Industry Report for 2021

Sibanye Stillwater Limited (SBSW)

Based in Weltevreden Park, South Africa, SBSW is a precious metal mining company that operates  in the United States, Zimbabwe, Canada, South Africa, and Argentina. It produces platinum group metals (PGMs), gold, nickel, copper, chrome, and other by-products. The company holds interest in the Marathon PGM project in Ontario, the Burnstone and southern Free State gold projects in South Africa, and various other projects.

In July, the company agreed  with Eramet SA, a French mining group, to acquire 100% of its Sandouville nickel hydrometallurgical processing facility for a cash transaction of approximately €65million ($76.17). This acquisition marks an advancement in  its battery metals strategy and positions it uniquely to build a leading battery metals platform in Europe.

SBSW’s trailing-12-month revenue stood at R127.39 billion ($8.6 billion). Its trailing-12-month gross profit came in at R42.07 billion ($2.8 billion), while net income from continuing operations amounted to R29.31 billion ($1.97 billion). The company’s trailing-12-month EBITDA was  R44.79 billion ($3.02 billion). And  its trailing-12-month operating income totaled R39.32 billion ($2.65 billion).

A $2.66 consensus EPS estimate for the current year represents a 4.3% improvement year-over-year. The $11.72 billion consensus revenue estimate for its fiscal year 2021 indicates a 51.5% increase year-over-year. The stock has gained 34.1% over the past year and 4% over the past month. SBSW is currently trading 19.1% below its 52-week high of $20.68, which it hit on April 16, 2021.

Two Wall Street analysts have provided ratings for the stock, and both have rated it Buy. Closing yesterday’s trading session at $16.73, the $25 consensus price target  represents a potential 49.4% upside.

Kinross Gold Corporation (KGC)

Canada-based KGC is a gold and silver mining company that explores for and develops gold properties in Brazil, Chile, the United States, Ghana, Mauritania, and the Russian Federation. The company’s proven and probable mineral reserves include roughly 30 million ounces of gold and 59.2 million ounces of silver.

Last month, the company announced that the Toronto Stock Exchange had approved its normal course issuer bid (“NCIB”) program. Under this program, KGC can purchase up to 63,096,676 of its common shares between August 3, 2021, and August 2, 2022. The share buyback program will enable the company to enhance shareholder returns.

Also in July, KGC completed a definitive agreement with the Government of Mauritania to offer enhanced certainty on Tasiast mine operations. This strategic partnership should further solidify the two parties’  long-standing and constructive relationship.

In the second quarter, ended June 30, 2021, KGC’s metal sales amounted to $1.0 billion. The company reported $156.5 million in adjusted net earnings, and a gross profit of $315.1 million. Its adjusted operating cash flow was  $363.8 million, while its free cash flow totaled $182.8 million for this quarter. Furthermore,  its operating earnings stood at $193.9 million.

Analysts expect KGC’s revenue for its fiscal year 2022 to be $4.78 billion, representing 24% year-over-year growth. In addition, the company’s EPS is expected to increase 90.5% next year. The stock is currently trading 42.2% below its 52-week high of $10.32, which it hit on September 18, 2020.

Wall Street analysts are very bullish on KGC. Among eight analysts that rated the stock, seven have rated it a Buy. The $9.43 consensus price target represents a 58.2% increase from its $5.96 last closing price.

Eldorado Gold Corporation (EGO)

EGO is a Canadian gold mining producing mid-tier gold and base metals with operations in Europe, Asia, and the Americas. The company holds interests in Lamaque gold mines located in Canada; Sapes gold mines located in Greece; and Tocantinzinho development project located in Brazil. In addition,  it produces silver, lead, zinc, and iron ore.

This month, EGO announced the pricing of a $500 million senior notes offering due 2029. It plans to use the offering’s net proceeds  to repay outstanding amounts under its existing term loan facility and revolving credit facility and for other general corporate purposes.

In July, the company acquired 15.04 million common shares of Probe Metals Inc. for $23.69 million. The acquisition could strengthen EGO’s position in the market.

During the second quarter, ended June 30, 2021, EGO’s gold revenues totaled $209.5 million, while its metal sales amounted to $233.2 million. Its net cash generated from operating activities stood at $37.05 million. Also,  EGO’s cash and cash equivalents came in at $409.73 million, while its adjusted EBITDA totaled $101.9 million for this period.

EGO’s EPS is expected to increase 34.4% in the fiscal period ending December 2022. A  $977.11 million consensus revenue estimate  for next year represents a 5.2% improvement of 5.2% from the same period last year. The stock is currently trading 42.2% below its 52-week high of $14.49, which it hit on November 6, 2020.

Of five analysts that rated the stock, three have rated it a Buy. Closing yesterday’s trading session at $8.38, the $15.56 consensus price target represents a potential 85.7% upside.

Click here to check out our Gold and Silver Industry Report for 2021

SBSW shares were trading at $16.81 per share on Wednesday morning, up $0.08 (+0.48%). Year-to-date, SBSW has gained 9.68%, versus a 19.24% rise in the benchmark S&P 500 index during the same period.

About the Author: Imon Ghosh

Imon is an investment analyst and journalist with an enthusiasm for financial research and writing. She began her career at Kantar IMRB, a leading market research and consumer consulting organization.


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