Goldcorp Inc. (NYSE: GG) stock has fallen 28% this year, coinciding with a major dip in gold prices. With GG stock trading near $13 per share, this is an excellent buying opportunity.
Spooked by a flash crash in Asia, gold prices plunged to a five-year low of $1,080 an ounce July 20. The drop was the result of a "bear raid," where institutional investors create windfall profits through short sales and futures contracts.
"If it works, the targeted stock, bond, currency, or - in this case - commodity plunges, allowing the short sellers to buy back shares they've borrowed and sold earlier at a huge discount," Money Morning Chief Investment Strategist Keith Fitz-Gerald explained. "Typically, the sellers work together to establish a massive sale that overwhelms buyers and inflicts huge losses on anybody who's long."
In this particular circumstance, traders took advantage of the fact that Japan's markets were closed. So there were even fewer buyers able to mount a defense against the bear raid.
GG stock got caught up in the rout. Goldcorp shares slipped to a 52-week low of $12.86 intraday July 20. They have since recovered to trade around $13.30 today.
Investors have bailed on commodities this year as China's economy expands at its slowest pace since 1990, and the U.S. Federal Reserve moves closer to raising borrowing costs.
But a number of industry experts now say the yellow metal is oversold, and that current prices provide an opportunity to jump back into the precious metal and related markets.
Even if the gold price continues to fall further, RBC Capital Markets on July 22 cited Goldcorp as one of the gold producers able to withstand a sub-$1,000 an ounce gold price scenario. That's due to the firm's "low net debt, low capital spending to cash flow ratio, and low cost mines."
That followed a bullish call on July 21 from JPMorgan. Analyst John Bridges reiterated his "Buy" rating on GG stock with a $27.50 price target. That indicates the investment bank is looking for a roughly 65% gain for GG stock over the next 12 months.
And the GG stock price will continue to be in focus as the company's earnings date approaches. Here's what to watch for...
GG Stock in Focus After Earnings
Goldcorp has a current market cap of $11.18 billion. It's engaged in the operation, exploration, development, and acquisition of precious metal properties in Canada, the United States, Mexico, and Central and South America. That means its low-cost gold production is located in mostly safe jurisdictions. Further, it remains one of the world's fastest-growing senior gold producers.
Goldcorp reported earnings on July 30 and posted EPS of $0.08. That beat consensus estimates of $0.07. It was also much higher than last year's EPS of $0.02.
The median GG stock price target among industry experts is $23.78, according to data from The Wall Street Journal. Among the 23 analysts who cover the stock, 16 rate GG shares "Buy." Two have an "Overweight" rating. Five maintain a "Hold." There are no "Underweight" or "Sell" ratings.
Money Morning Executive Editor Bill Patalon likes to remind investors that we "don't take our lead from Wall Street, but we're never averse to cite its research if its views coincide with our own."
[epom key="ddec3ef33420ef7c9964a4695c349764" redirect="" sourceid="" imported="false"]
"And with Goldcorp," Patalon continued, "Wall Street analysts are starting to see the company's financial strength and vast business potential."
Money Morning Resource Specialist Peter Krauth is also a fan of GG stock.
Speaking with Patalon in mid-July, Krauth explained his positive stance. Krauth noted Goldcorp is "well-run, innovative, and forward-thinking." He added that "there's lots of upside for investors."
GG stock also sports an appealing 4.65% dividend yield. Since 2003, the company has paid its dividends monthly. That makes it particularly attractive to investors looking for a reliable and steady income stream.
Stay informed on what's going on in the markets by following us on Twitter @moneymorning.
Profit Alert: Since Money Morning Executive Editor Bill Patalon launched his Private Briefing program just a few short years ago, he's recommended 192 stocks that have either doubled or tripled in value. The service has completely revolutionized the way people invest. Keep reading to find out more about his extensive research and premium stock picks...
Related Articles:
- Kitco: Which Gold Companies Could Hold Up Best At $1,000/oz Gold - RBC Capital Markets
- The Wall Street Journal: GG Market Data
- Reuters: Gold Plunges to Five-Year Lows After Early Asia Rout