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Actionable news in GG: GOLDCORP Inc,

Morgan Stanley Initiates Goldcorp At Overweight, Favors Name Over Barrick Gold And Newmont Mining

Most gold stocks have had a good run year-to-date, with the exception of Goldcorp Inc. (USA) GG, which has lagged peers by ~95 percent YTD due to disappointing guidance, Morgan Stanley’s Evan L Kurtz said in a report. He initiated coverage of the company with an Overweight rating and a price target of $22.

Better Risk-Reward

The underperformance of Goldcorp’s shares has created “a good entry point,” analyst Evan Kurtz commented. He added that Goldcorp’s shares offered a better risk-reward than Barrick Gold Corporation (USA) ABX [Rated: Equal-eight, PT: $20] and Newmont Mining Corp NEM [Rated: Equal-eight, PT: $41], citing the following reasons:

  • Goldcorp’s shares are pricing in gold below the strip, based on NAV
  • The company’s production guidance for 2016-2018 appears conservative
  • The company is less likely to commence work on a large greenfield project or make a big acquisition, since it has steady medium term production and a large resource base
  • Although Goldcorp is mining above reserve grade, the issue seems to be overblown

“We believe effective capital allocation will be a key differentiator for stocks going forward, and GG's brownfield pipeline lowers risks relative to ABX and NEM,” the analyst stated. He further mentioned that there is 26 percent upside to the price target for Goldcorp, while those for Barrick Gold and Newmont Mining represented downside of 6 percent and 8 percent, respectively.

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Aug 2016Morgan StanleyInitiates Coverage onOverweight
Aug 2016BarclaysMaintainsOverweight
Aug 2016CitigroupInitiates Coverage onNeutral

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