Barrick Gold Stock – With Gold Ripping, Is It a Buy?
Barrick Gold Corporation (NYSE: GOLD) is a leading global producer of gold and copper, with operations spanning some of the most prolific mining districts worldwide. The company’s portfolio focuses on high-margin, long-life assets, while also engaging in the exploration and sale of silver and energy materials.
Barrick holds ownership stakes in gold mines located in countries such as Argentina, Canada, Côte d’Ivoire, the Democratic Republic of Congo, the Dominican Republic, Mali, Tanzania, and the United States.
In this analysis, we’ll assess Barrick Gold’s current financial position, recent earnings performance, conduct a fair value analysis, and review market sentiment using options data. By the end, we aim to determine whether Barrick is a compelling addition to your portfolio.
Earnings Recap
Barrick Gold delivered an impressive second-quarter performance on August 12, exceeding both earnings and revenue expectations. The company reported adjusted earnings of $0.32 per share, outperforming analysts’ estimates of $0.27. Revenue also came in ahead of projections, with the company posting $3.16 billion compared to the forecast of $3.14 billion.
On quarter-pver-quarter basis, net earnings surged by 25%, reaching $370 million. The company’s EBITDA margin also expanded significantly, growing 17% to 48%. With robust operating cash flow of $1.16 billion, Barrick demonstrated its ability to generate consistent free cash flow, which reached $340 million during the quarter.
Gold production totaled 948,000 ounces for the second quarter, with all-in sustaining costs of $1,498 per ounce. The company reaffirmed its previously issued guidance of producing between 3.9 million and 4.3 million ounces of gold in 2024. Barrick also made strides in key growth initiatives, most notably in the development of its Goldrush mine in Nevada and the advancement of the Reko Diq copper-gold project in Pakistan.
Our Perspective
Investors often turn to gold mining stocks as a hedge against economic uncertainty, seeking stability in times of market turbulence. Barrick’s strong quarterly performance has caught the market’s attention, but it does not necessarily establish a lasting upward trajectory for the stock.
While better-than-expected earnings are encouraging, a single quarter of outperformance does not set a definitive trend. It’s essential to remain cautious, particularly when evaluating long-term growth potential of the company.
Despite the solid results, Barrick faces a competitive disadvantage relative to its larger peers. In the context of major gold miners, Barrick’s expected revenue growth lags behind companies like Newmont (NYSE: NEM) and Agnico Eagle Mines (NYSE: AEM). This is a crucial factor for investors to consider, as expanding production during periods of elevated margins is key to capitalizing on favorable market conditions.
Additionally, while rising gold prices provide a tailwind for Barrick’s earnings, the pace of price increases has slowed compared to earlier in the year. This signals that Barrick’s ability to manage production costs and deliver strong output will become increasingly important as 2024 progresses. Investors who prioritize growth in the gold sector may find more promising opportunities with other large-cap miners that offer higher growth potential.
Analyst Perspectives
Wall Street analysts remain optimistic about Barrick Gold’s prospects. Price targets for the stock range from $18 to $27, with an average target of $22.44—indicating a potential upside of nearly 10% from current levels.
Source: SeekingAlpha
Valuation
Based on our fair value analysis using 15 different models—including DDM Stable Growth, Earnings Power Value, P/E Multiples, and various 10-year DCF methods—the estimated fair value of Barrick’s stock is approximately $23.50 per share. This suggests a potential upside of around 15% from its current price.
Options Analysis
Options data offers additional insight into market sentiment. Recent trends show a net positive flow in options contracts, with a 30-day cumulative total of +2,524,478. August data suggests mixed market sentiment, with no clear direction. By September, a bullish trend is expected, indicating potential upward momentum. However, by October, strong resistance levels could impede further gains, warranting caution for investors.
Source: Visual Sectors
Conclusion
While Barrick Gold’s recent earnings were better than expected and market sentiment appears cautiously optimistic, the long-term outlook remains uncertain. Given Barrick’s lower expected revenue growth compared to peers like Newmont and Agnico Eagle Mines, we believe it may be wiser to explore these alternatives if you’re focused on gold miners with stronger upside potential.