Insights

These top brokers say the BHP (ASX:BHP) share price is a bargain buy

Out of the 14 analysts covering BHP, 9 have a buy rating on the share.
The post These top brokers say the BHP (ASX:BHP) share price is a bargain buy appeared first on The Motley Fool Australia. –

Shares in resources giant BHP Group Ltd (ASX: BHP) surged 1.5% at the open on Wednesday, after finishing up 4% in yesterday’s session. The BHP share price is $38.28 at the time of writing.

Investors responded positively to BHP and Woodside Petroleum Limited‘s (ASX: WPL) announcement yesterday. The pair is set to merge their respective oil and gas portfolios and create a global energy company.

BHP also advised yesterday it had approved a capital allocation of US$1.5 billion to develop phase 1 of its Scarborough project in Western Australia.

These top brokers have a buy rating on BHP shares. And each has recently updated the market on its outlook for BHP investors. Let’s take a closer look.

What’s the verdict on the BHP share price?

Following BHP and Woodside’s announcement yesterday, the team at RBC Capital Markets has weighed in on the debate. The transaction is still considered a taxable item in the eyes of the Australian Taxation Office (ATO). RBC notes this could be a risk to cash flows.

However, it highlights BHP investors might benefit from the deal, given the dividend schedule and exchange ratio of Woodside shares.

RBC says that “the new WPL shares will be distributed to BHP shareholders as an in-specie fully franked dividend,” meaning that BHP shareholders won’t realise the tax impact.

It also states the “cost base of the issued WPL shares will also be higher relative to a pro-rata split (unlike South32 which received demerger relief)”.

RBC also takes note of “BHP’s orderly (and lengthy) exit from coal” in a previous note to clients, pointing to the sale of its BMC stake. The broker reckons that BHP is likely to share the profits of this deal with shareholders via a special dividend.

RBC also reckons that BHP will likely hold onto its own BMA metallurgical coal business and push towards high-quality steelmaking coal. These factors combined help build RBC’s buy case for BHP. It has an outperform rating and $42/share price target on the company.

Fellow broker Macquarie has also weighed into the investment debate. It too reckons BHP shareholders might benefit from a special dividend this year.

Macquarie thinks the miner could end FY22 in a net cash position of $3.2 billion. That’s since offloading its petroleum business and selling its BMC stake. This “indicates ample additional cash return capacity” even when factoring in an 80% payout ratio for FY22.

Regarding BHP’s sale of its BMC stake to Stanmore, Macquarie likes the deal structure as it won’t see BHP hand over operations until 2022. This “is a positive for BHP given the current buoyant coal prices,” as economic ownership won’t be backdated, unlike other divestments BHP has completed recently.

The broker also has an outperform rating on the BHP share price and values BHP at $52/share. This implies an over 36% upside potential at the time of writing.

What’s the sentiment?

Out of the 14 analysts covering BHP, 9 have a buy rating on the share. The average price target from the group is $43.98. This consensus figure implies an upside potential of around 15.5% at the time of writing.

The team at Argus is the most optimistic, with an $85.75/share price target. Whereas other brokers have a $39 valuation on BHP shares.

The spread in the top and bottom price targets from analysts covering the share is wide at $54 or 180%. No brokers have a sell rating on BHP at this stage.

BHP share price snapshot

In the past 12 months, the BHP share price has slipped into the red, after losing over 10% this year to date.

It has levelled off in the last month, and is up around 1% in that time. Regardless, BHP shares are lagging the S&P/ASX 200 Index (ASX: XJO) return of around 13% in the last year of trading.

The post These top brokers say the BHP (ASX:BHP) share price is a bargain buy appeared first on The Motley Fool Australia.

Should you invest $1,000 in BHP Group right now?

Before you consider BHP Group, you’ll want to hear this.

Motley Fool Investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now… and BHP Group wasn’t one of them.

The online investing service he’s run for nearly a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

*Returns as of August 16th 2021

More reading

5 things to watch on the ASX 200 on Wednesday

BHP (ASX:BHP) share price jumps 4% on ‘global energy company’ deal

Looking to invest in the electrification and battery theme? Here are 5 ASX shares to consider

Woodside (ASX:WPL) share price climbing as megadeals signed off

ASX 200 (ASX:XJO) midday update: BHP, Woodside rise, TechnologyOne falls

The author Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Share on facebook
Share on twitter
Share on linkedin

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;


To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.


An active and funded account with a positive trading balance is required to continue to have access to the tools;


Although the tools are available to you indefinitely, Monex Securities may at it’s discretion disable access to the tools in the future;


Monex securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

Important Notice
iOS & Android App - 12 International Markets & Over 70% Global Market Cap. $0 Brokerage On US Trades. Click Here!