BHP share price: Could it rebound soon?
- BHP Group (ASX: BHP) share price drops to AU $ 36.41 on Monday
- Its stocks have suffered four consecutive sessions of losses
- In the short term, BHP could continue to face headwinds
- Want to take advantage of the falling BHP share price? Open an account with us to sell the stock now.
What is weighing on the BHP share price?
Inflationary concerns along with falling iron ore prices caused the stock prices of Australian mining majors to drop on Monday.
BHP lost 0.5% overnight to close at A $ 36.41, extending the share price losses to a fourth consecutive session.
Research teams were largely optimistic about the BHP meter listed in Australia. As of Sunday night, nine analysts called it a “buy,” four recommended it as “conservation,” and none gave any “sell” calls, according to Bloomberg data.
Their 12-month average price target was AU $ 46.92 per share, implying a potential rise of nearly 29% based on Monday’s close.
Last week Macquarie and Bernstein each maintained their “outperform” ratings on BHP, but lowered their target prices slightly to AU $ 54 and AU $ 41, respectively, from AU $ 56 and AU $ 45 previously.
Jefferies analysts downgraded their ratings for BHP and rival Rio Tinto Group to “hold”, instead of “buy” previously, citing “short-term downside risk to iron ore and consensus forecast , declining returns on capital, accelerating cost pressures and increasing risk transactions’.
BHP May See Portfolio Catalysts, Bloomberg Says
The Bloomberg Intelligence (BI) research team wrote last Friday that BHP has relatively lower exposure to iron ore and more influence to copper, compared to Rio Tinto and Vale. This puts the mining giant in a better position in the years to come, compared to the two peers, BI added.
From an absolute standpoint, “higher than expected returns on capital, less scope for downside estimates and portfolio catalysts may be key drivers” for BHP, analysts noted.
In addition, BHP’s ongoing divestiture of its petroleum division, while incomplete, could be underestimated, they said.
“Other catalysts could include a split of its thermal coal (NSW, Colombia) and lower grade coal (BHP-Mitsui joint venture) assets,” BI said.
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Deutsche Bank predicts continued headwind in the near term
As the value of BHP shares has emerged after the stock’s recent pullback, Deutsche Bank expects weak trends in Chinese steel production to remain a drag on iron ore prices in the near term. .
Meanwhile, Deutsche Bank’s research team also described BHP’s exit from oil as “a good strategic step.” However, analysts see a limited increase in the valuation of the divestiture, which could leave BHP short of growth options and increase the likelihood of copper and nickel acquisitions.
Regarding the group’s production report for the first quarter of fiscal 2022, analysts at Barclays said the group “has had a mixed start” to its fiscal year, “with decent performance in oil and iron ore. Western Australia offset by a weaker quarter in copper and metallurgical coal.
Barclays expects a limited impact on BHP’s forward estimates. The production report, released late last month for the quarter ended September 2021, showed lower quarterly production and signaled a labor shortage.
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