UBS Picks 2 Gold Stocks With Double-Digit Upside Potential

In a recent report, UBS analysts have identified two gold stocks with significant upside potential: Barrick Gold (ABX) and Newmont Corporation (NEM). The bank's bullish outlook on gold prices, driven by geopolitical risks and inflation concerns, supports its confidence in these stocks. This article explores the fundamentals, risks, and valuation of these gold stocks, as well as the broader market trends that inform UBS's double-digit upside potential prediction.

Gold prices have been volatile in recent years, influenced by various factors such as geopolitical events, interest rates, and currency fluctuations. UBS analysts predict that gold prices will reach $2,900/oz by the end of 2023, driven by geopolitical tensions and inflation concerns. This bullish outlook on gold prices supports UBS's confidence in the double-digit upside potential of ABX and NEM.

Both ABX and NEM have strong fundamentals that support UBS's bullish outlook. ABX has a dividend yield of 1.8% and an expected earnings growth rate of 15% in 2024, while NEM has a dividend yield of 2.2% and an expected earnings growth rate of 12%. These dividend yields and earnings growth rates are attractive compared to the S&P 500's average dividend yield of 1.6% and expected earnings growth rate of 10%. Additionally, gold prices are expected to rise, which should benefit these gold mining companies.



However, investors should be aware of several risks and challenges that could impact UBS's bullish outlook on these gold stocks. Firstly, gold prices are volatile and can be influenced by various factors such as geopolitical events, interest rates, and currency fluctuations. Secondly, the performance of gold stocks can be affected by the specific company's operational and financial health, as well as the overall mining industry's trends. Additionally, regulatory changes and environmental concerns may pose challenges for the mining sector. Lastly, UBS's projections are based on current market conditions and may not account for unexpected events or shifts in investor sentiment.

In terms of valuation, ABX and NEM appear to be undervalued compared to their peers and historical averages. The industry average P/E ratio for gold stocks is around 25, according to Morningstar data. This suggests that ABX and NEM are trading at a discount to their peers. Additionally, when compared to their historical averages, both stocks are trading at a significant discount, indicating potential undervaluation.

In conclusion, UBS's picks of ABX and NEM with double-digit upside potential are supported by the bank's bullish outlook on gold prices, the strong fundamentals of these gold stocks, and their undervalued status compared to their peers and historical averages. However, investors should be aware of the risks and challenges facing these gold stocks and maintain a diversified portfolio. As always, thorough research and careful consideration of multiple factors are essential before making any investment decisions.

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