Distressed ASX Gold Shares Just Upgraded By A Top Broker
ASX gold stocks have been lagging the market and their quarterly updates have been a general disappointment – but now is precisely the time to buy these stocks.
This is JPMorgan’s view even though the broker found the latest quarterly production reports “disappointing”.
The broker is not the only one who is not impressed. The market has largely pushed aside our major ASX gold producers.
ASX gold stocks have lost their luster
the Newcrest Mining Ltd The share price (ASX: NCM) has only risen 6% in the past year, while Evolution Mining Ltd (ASX: EVN) share price and Northern Star Resources Ltd (ASX: NST) the stock price fell 3% and 11%, respectively.
On the other hand, the S & P / ASX 200 Index (Index: ^ AXJO) jumped 34% over the same period and is approaching its record high.
You can blame the falling price of gold for the sector’s underperformance. Some of the ASX gold miners even got a little creative in their quarters to help paint a better picture, although that didn’t seem to help much.
Slightly dim quarterly updates
“There have been few downward revisions to the forecast for FY21, but the risk remains on the downside, with some hoping to hit as much as 35% of annual production in the last quarter to take them to the bottom of the year. forecast scale, ”said JPMorgan
“Costs are under even more pressure, even after moving as much capex as possible out of AISC to ‘growth’ capex.”
The broker believes that much of the cost pressure came on spontaneously due to the drop in production. Operate a game at scale and the less your products are reduced, the worse your margins.
The outlook on the cost front is not improving either. One need only look at the skills shortage in Western Australia to see this.
ASX gold stocks turnaround in sight
But there is light at the end of the tunnel for the ASX gold sector. JPMorgan estimates that removing gold from its record high of over US $ 2,000 an ounce to around US $ 1,700 an ounce could be a turning point.
“Gold prices appear to have hit a short-term low, and we have raised our short-term prices by $ 50, to $ 1,750 / ounce, increasing profits by 1-7%,” JPMorgan said. .
“We believe the sector continues to present good value on a NPV [net present value] based.”
This is encouraging given that JPMorgan’s forecast is below consensus. What this shows is that there could be too much bad news in the beleaguered ASX gold stocks.
ASX GOLD SHARES TO BUY TODAY
JPMorgan has updated its recommendation on Regis Resources Limited (ASX: RRL) share price to be “overweight” to “neutral” with a 12-month price target of $ 3.20 per share.
His main choices in the industry include Newcrest share price, Northern Star share price, SSR Mining Inc CDI share price (ASX: SSR) and Gold Road Resources Ltd (ASX: GOR) share price.
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Motley Fool Contributor Brendon Lau holds shares in Evolution Mining Limited, Newcrest Mining Limited and Regis Resources Limited. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article only contains general investment advice (under AFSL 400691). Authorized by Bruce Jackson.