JPMorgan raises Northern Star to Overweight rating By Investing.com

JPMorgan made a notable adjustment to its rating for Northern Star Resources (NST:AU) (OTC: NESRF), upgrading the stock from Neutral to Overweight. Accompanying this upgrade was an increase in the price target, now set at AUD16.80, up from the previous AUD14.50. This revision reflects the firm’s response to recent movements in the gold market and monetary policy expectations.

The upgrade comes as gold prices continue to reach new heights, with anticipation of a Federal Reserve rate cut adding momentum. According to JPMorgan, the first rate cut in a cycle typically acts as a stimulus for gold prices due to its impact on real yields. The market has already seen a 25% increase in gold prices since early 2023, as the forecast for the timing of the first cut fell below one year.

The analyst’s commentary highlighted that consensus estimates predict approximately 200 basis points of cuts to the Federal Reserve rate over the coming year, which could sustain the gold rally. However, the projections for declines in real yields are more conservative. JPMorgan has updated its gold curves to reflect the latest market conditions, resulting in increased earnings and valuations for covered stocks, all of which show strong free cash flow yields over a 12 to 24-month horizon.

Northern Star, along with GOR and DEG, has been identified as one of JPMorgan’s preferred gold stocks due to their higher leverage to gold prices and lower risk in the face of potential economic downturns, especially when compared to companies like EVN and NEM that have greater exposure to .

Northern Star Resources disclosed its FY24 financial results, revealing a second-half earnings per share (EPS) of A38 cents, falling short of both BMO Capital’s and the consensus estimates. Despite this, the gold mining firm demonstrated a robust year in production, benefiting from rising gold prices, and reported a substantial liquidity position of A$2.7 billion.

Moreover, the company announced a 12-month extension of its A$300 million share buyback program and declared an unfranked dividend of A25 cents per share.

These financial developments, Northern Star Resources has reiterated its guidance for FY25 and its long-term growth objectives. The company also reported a 32% increase in underlying free cash flow for the June quarter, reaching AUD $189 million. Looking forward, Northern Star has set a production target of 1.65 to 1.8 million ounces of gold for FY’25 and aims to achieve the 2 million ounce mark by FY’26.

In response to these recent developments, BMO Capital maintained its Outperform rating on Northern Star Resources with a steady price target of AUD17.00, while Jefferies raised its price target to AUD16.50 and maintained a Hold rating on the stock.

InvestingPro Insights

In light of JPMorgan’s recent upgrade of Northern Star Resources, current InvestingPro data and tips offer valuable insights for investors considering this gold mining company. With a market capitalization of $12.19 billion and a P/E ratio standing at 28.4, Northern Star Resources is demonstrating significant financial stature in the market. The company’s revenue growth is notable, with a 19.13% increase over the last twelve months as of Q4 2024, reflecting strong operational performance.

InvestingPro Tips suggest that Northern Star Resources has a history of rewarding investors, having raised its dividend for three consecutive years and maintained dividend payments for 13 consecutive years, which may appeal to income-focused shareholders. Moreover, the company’s stock is known for low price volatility, which can be attractive to investors looking for stability in their portfolio. Additionally, analysts predict the company will be profitable this year, backed by profitability over the last twelve months, which could be a reassuring sign for potential investors.

For those interested in deeper analysis, there are more InvestingPro Tips available, providing a comprehensive understanding of Northern Star Resources’ financial health and market performance. Visit https://www.investing.com/pro/NESRF for a complete list of tips and in-depth metrics.

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