Insights

Top broker upgrades BHP (ASX:BHP) share price to a buy rating

This mining giant’s shares could be in the buy zone…
The post Top broker upgrades BHP (ASX:BHP) share price to a buy rating appeared first on The Motley Fool Australia. –

The BHP Group Ltd (ASX: BHP) share price has been out of form in recent months following weakness in the iron ore price.

This means the mining giant’s shares are now down 10% since the start of the year. This compares to a year to date gain of 23% in August.

Is the BHP share price in the buy zone?

One leading broker that sees a lot of value in its shares at the current level is Morgans.

According to a note this week, the broker has upgraded the Big Australian’s shares to an add rating with an improved price target of $46.05.

Based on the current BHP share price of $38.57, this implies potential upside of just over 19% for investors.

In addition, the broker is forecasting a ~$3.96 per share fully franked dividend in FY 2022. If we include this in the equation, the total potential return stretches to almost 30%.

What did the broker say?

While the broker still has concerns about the iron ore market, it appears to believe the sell down of the company’s shares has been overdone.

Morgans commented: “Our cautious view on iron ore remains, but the relative value on offer in BHP has grown as: 1) BHP’s share price has fallen (now implying a US$61/t iron ore price), 2) the value of the petroleum demerger has grown with WPL’s share price outperformance (the guided 52/48 WPL/BHP merger split suggests the value attributed to BHP has grown US$3.8bn), and 3) BHP’s robust dividend profile of +10% at the current share price.”

“With these factors in mind, and BHP now trading at a sizable discount to our target price, we upgrade our rating to Add (from Hold),” it concluded.

All in all, this could make the mining giant one to consider if you’re looking to invest in the resources sector.

The post Top broker upgrades BHP (ASX:BHP) share price to a buy rating appeared first on The Motley Fool Australia.

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

Before you consider BHP, 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 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

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These are the 5 highest yielding dividend stocks in the ASX 200

Own BHP (ASX:BHP) shares? Here’s how Twiggy is heating up competition for battery minerals

BHP (ASX:BHP) share price tumbles on Q1 update

Why BHP, Propel, Silver Lake, and Tabcorp shares are falling

Motley Fool contributor James Mickleboro 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.

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