Here’s Why Newmont Stock Popped Today (Hint: Wall Street Likes its Valuation)

Shares in gold miner Newmont Corp (NEM +2.42%) rose by as much as 5.4% in early morning trading today. Yes, the price of gold is up slightly as I write, but that’s not the real reason investors feel more optimistic today. The likely catalyst for the stock’s move today is a TD Cowen analyst’s upgrade of the stock from a hold recommendation to a buy, even as the analyst, Steven Green, nudged the price target down to $127 from $129.

TD Cowen upgrades Newmont stock

The stock has been weak recently and is down by a low single-digit percentage on the year. That’s enticing enough to encourage the analyst to recommend the stock on valuation grounds. Evaluating commodity stocks like Newmont is always a difficult endeavor, as it always implies some sort of assumption for the underlying commodity it produces; in this case, gold.

Today’s Change

(2.42%) $2.25

Current Price

$95.35

Key Data Points

Market Cap

$99BMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.

Day’s Range

$95.24 – $98.12

52wk Range

$55.37 – $134.88

Volume

307.8K

Avg Vol

8M

Gross Margin

55.12%

Dividend Yield

1.10%

The case for Newmont and gold

However, I do think there’s a strong case for agreeing with the analyst. The weakness in gold prices this year is not surprising, given the rush by investors to invest in the precious metal last year. Simply put, the massive influx of speculative money into gold left it susceptible to a correction, as easy money can flow in and out.

That said, the underlying case for gold remains strong, as global central banks continue to seek ways to diversify out of U.S.-denominated debt and move assets out of U.S. dollar assets, which could be subject to sanctions. They are likely to buy gold on weakness, as in the jewelry market, while demand for gold in technology is relatively stable.

Image source: Getty Images.

If gold does indeed recover, Newmont is an ideal way to play the theme, given management’s doubling down on gold by divesting non-core assets and focusing on lower-cost production in its core assets. As such, buying on weakness, while acknowledging it could get weaker in the near term, makes sense for long-term gold bulls.