The Whitehaven Coal Ltd (ASX: WHC) share price has been on the up and up in 2022.
Record profits brought about by soaring coal prices have been behind much of Whitehaven's gains. But could the trend continue in the new year?
Speaking to Market Matters' James Gerrish, Shaw and Partners senior resource analyst Peter O'Connor said:
Whitehaven year-to-date [is] up about 260%. Do we expect that to be the same in 2023? No. But we do expect that to continue to perform, particularly in the first quarter of the year.
Right now, the Whitehaven share price is $9.90. Could a 100% upside be on the cards for the coal stock? Let's take a look.
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Could the Whitehaven share price reach $20?
O'Connor is particularly bullish on coal and the companies producing it.
Indeed, as Gerrish pointed out, the expert is the most bullish in the market on Whitehaven, slapping it with a $15 price target. Responding to questions on whether that target is realistic, O'Connor said "absolutely":
If you look at the correlation… commodity equities follow the commodity price on 95% of occasions. Plugging [coal] spot numbers into my… model, gets share prices dramatically higher than where they should be.
With Whitehaven, it should be closer to $20 than $15.
But readers would be wise not to get their hopes up on the Whitehaven share price doubling anytime soon – there's more to that figure than meets the eye. O'Connor continues:
We've set [the stock] at a reasonable target of $15 per share where they should trade.
Yes, ESG discounts will see that, perhaps, a little bit more challenging. That's where we step down and take a look at the buyback.
Whitehaven's committed a buyback over 20% of its stock after doing 10% last year… that will compress the shares on issue and grow the share price more.
Those two factors, James, will get me to that target price.
So, when might the Whitehaven share price be expected to launch 50% to $15? O'Connor believes it might be through the Northern Hemisphere's winter to the company's first half result, expected in February.
"The background and the tailwinds are favourable and continue into the new year as well," the expert said.
