Gold price

Here’s why JPMorgan is bullish on the Newcrest share price

Sep 23, 2022
Man in mining hat with fists raised and eyes closed looking happy and excited about the Newcrest share price

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Shares in Newcrest Mining Ltd (ASX: NCM) are rangebound today at $24.40, up 0.12% at the time of writing.

The Newcrest share price has been volatile in 2022, having rallied as high as $28.84 and slipped to as low as $21.50.

Meanwhile, the price of gold has been equally as volatile, having booked a circa 1% loss over the past month.

Returns for both assets for the year to date are plotted on the chart below.

TradingView Chart

JPMorgan stays overweight on Newcrest

Analysts at investment bank JPMorgan retained their overweight rating on Newcrest in a recent note, flagging several positives.

“Newcrest Mining is an ASX-listed gold producer with assets in Australia, Papua New Guinea and Canada,” the team noted.

They feel positive about the potential Brucejack Mill expansion but also cited potential cost pressures across the businesses as a potential headwind.

Despite Newcrest being the broker’s “…bottom pick in [its] gold coverage…on a forced ranking…”, it still finds Newcrest attractive. The team said the stock offered a potential “FY23E EV/EBITDA of 5.5x, P/NPV of 0.86x and solid 6.3% free cash flow yield”.

According to the broker’s note:

Newcrest’s portfolio is underpinned by the world-class Cadia Valley Operations in central-west New South Wales. NCM also operates the Lihir gold operation on Lihir Island off the coast of Papua New Guinea. We have an Overweight rating on the stock, based on valuation.

The JPMorgan team values Newcrest Mining at $30 per share, slightly behind the consensus price target of $30.37, according to Bloomberg data.

From that list, 47.1% of brokers covering Newcrest rate it as a buy or hold.

Newcrest share price snapshot

In the past 12 months, the Newcrest share price has slipped by more than 13%.

It has lost 8% in the past four weeks.

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