Agnico Eagle Mines Ltd (USA) AEM has had quite a run so far in 2016, but RBC Capital analyst Stephen Walker believes the party is now over for the gold miner. RBC Capital had downgraded Agnico Eagle from Outperform to Sector Perform following a more than 120 percent gain so far this year.
According to Walker, the downgrade is about the stock’s valuation, not the company’s performance.
“The shares appear to be currently pricing in the recent favourable guidance revision as well as the expected Q4/16 and year-end reserve additions,” Walker explained.
He noted that the company has consistently met or exceeded production targets, but this strong execution is already priced into the stock’s premium valuation.
Despite the downgrade, RBC upped its price target for the stock slightly from $65 to $67.
Looking ahead, Walker expects Agnico Eagle to trade mostly in-line with its Tier II peers, such as Eldorado Gold Corp (USA) EGO and IAMGOLD Corp (USA) IAG.
RBC’s price target sensitivity analysis indicates that Agnico’s stock is pricing in gold prices of $1,315/oz, slightly below the current price of $1,338.
Despite the stock’s premium valuation, Walker acknowledges that there are plenty of potential exploration catalysts ahead, including results from Amaruq, El Barqueno, Kittila, Canadian Malartic and Barsele.
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Disclosure: The author holds no position in the stocks mentioned.
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