Wed. Aug 10th, 2022

Two cheerful miners shake hands while wearing hi-vis and hard hats.

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That BHP Group Ltd (ASX: BHP) the stock price rises higher on Monday afternoon.

At the time of writing, the mining giant’s shares are up 0.5% to $ 37.90.

While this is positive on a red day for the ASX 200, BHP stock is still down a disappointing 30% from its August high of $ 54.55.

Is the BHP share price good value?

Although the recent weakness in the BHP share price is disappointing for shareholders, it may be a buying opportunity for non-shareholders.

That is the team’s perception Macquarie Group Ltd. (ASX: MQG), which last week maintained their outperform rating and $ 56.00 price target on the miner’s shares.

Based on the current BHP share price, this implies a potential increase of 48% over the next 12 months.

And that is before dividends. Macquarie predicts a fully franked dividend of $ 3.97 per share.

Why is Macquarie so bullish?

Macquarie is bullish on BHP mainly because of the diversity of its activities.

Although the price of iron ore has fallen sharply in recent months, this is offset by strong increases in other commodity prices such as coal.

“Liquid coke coal prices have enabled BHP to maintain momentum in the earnings upgrade despite the recent volatility in iron ore prices,” it commented.

In fact, the broker believes that the total commodity prices are strong enough for BHP to generate sufficient free cash flow to support a ~ 20 free cash flow dividend. Which, as mentioned above, is expected to support very generous returns in the short term.

In light of this, the broker seems to believe that the recent weakness in the BHP stock price may be a buying opportunity for investors seeking exposure to the resource sector.

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