The price of gold rose continues its rise, surpassing the $1,500-an-ounce mark earlier this month. If that upward trend continues, Barrick Gold stock (ticker: GOLD) could benefit, according to an analyst at Argus.
The back story. Barrick Gold stock gained early Monday morning after reporting second-quarter earnings. Adjusted earnings and revenue met Wall Street’s expectations, and the company said it expects full-year gold production in the upper end of its prior outlook.
Despite that upbeat news and its early gains, Barrick stock ended up down 1% to 17.96 on Monday as the market declined overall.
What’s new. Given trends in the price in gold, Argus’ David Coleman sees upside in the stock.
“The company’s results are linked to trends in gold production and pricing,” he wrote.
The precious metal averaged $1,267 per ounce in 2018, $1,307 per ounce in the first quarter of this year, and $1,317 per ounce in the second quarter, he noted.
“We believe that lower interest rates and slowing inflation will be a tailwind for gold prices,” he wrote. “We expect gold to trade in a range of $1,250-$1,600 per ounce in 2019, with an average price of $1,400. “
That, paired with management’s updated production outlook and benefits from last year’s acquisition of Randgold, led Coleman to upgrade the stock.
Barrick Gold stock was up 1% to $18.14 late Tuesday morning, while the price of gold was down 0.17% to $1,502.76 an ounce.
Looking Ahead. Coleman upgraded his rating on Barrick Gold stock to Buy from Hold, and maintained a long-term rating of Buy. He set a price target of $22, which implies a total potential return, including dividends, of 16% from Monday’s close, he noted.
He rated the miner’s financial strength as high, and noted its work to pay down debt, which was down to $5.8 billion in the second quarter from $6.4 billion in 2018 second quarter.
Coleman maintained his full-year 2019 earnings estimate of 48 cents per share and 2020 estimate of 55 cents a share.
“Although management projects higher production this year, it also expects costs to be higher,” he noted.
