Newmont Corporation (NYSE:NEM, TSX:NGT, ASX:NEM, ETR:NMM) shares moved higher after the gold producer was upgraded by UBS analysts citing a more supportive macro backdrop for gold, strong free cash flow outlook, and the potential for sustained shareholder returns.
The analysts upgraded the stock to ‘Buy’ from ‘Neutral’ and boosted their price target to $60 from $50.
Shares of Newmont traded up 8.7% at about $55 in the early afternoon on Friday.
The firm also raised its gold price forecast, now targeting an average of $3,500 per ounce in 2026.
“Gold and gold equities were initially sold (margin calls/equity de-grossing) and are now rallying; in our view the macro backdrop for gold is incrementally more supportive,” UBS wrote in a note, drawing parallels with the market's response to the Global Financial Crisis and COVID-19.
The analysts noted that Newmont shares have lagged both the gold price and the GDX ETF by about 40% over the past five years. This has driven a valuation de-rating from around 8x EV/EBITDA to roughly 6x at spot.
“Looking forward in our view 2025 guidance looks achievable and will drive positive operational momentum versus low expectations,” they wrote.
The investment bank also expects “material cash returns in 2025” and sees them as “sustainable in 2026 in a stronger for longer gold price environment.”
Analysts project a free cash flow yield of around 10% in 2026 under its base-case gold price scenario and anticipate Newmont will be below its $5 billion net debt target in the first half of 2025, enabling further buybacks beyond this year.
UBS also expects Newmont to return the majority of the approximately $3.2 billion in cash proceeds from recent divestments by the end of Q2 2025, most of it through share repurchases.
‘Conservative’ production guidance
Despite concerns about Newmont's operational consistency, UBS suggests the company’s revised production and cost estimates are now realistic.
“Newmont has a poor operational track record, missing production/cost guidance for the last five years, and following the completion of the Newcrest Mining merger laid out 5 year guidance in 1Q24 that it abandoned in 4Q24, and it no longer provides official medium-term production/cost targets,” they wrote.
“In our view, Newmont has a long way to go to re-establish an operational track record and credibility; but we believe 2025 production guidance of 5.6 million ounces is likely to be conservative.”