BHP stock: Buy, sell, or hold in August 2024?

The Big Australian's shares have just hit a 52-week low. Do analysts see this as a buying opportunity?

| More on:
A young man goes over his finances and investment portfolio at home.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

BHP Group Ltd (ASX: BHP) stock has been under the pump this year.

So much so, the mining giant's shares have just dropped to a new 52-week low of $41.08 on Wednesday.

While this is disappointing for the Big Australian's shareholders, could it be a buying opportunity for the rest of us? Let's see what brokers are saying about the mining giant as we approach the month of August.

BHP stock: Buy, sell, or hold?

The good news is that the broker community is largely positive on the mining giant and sees value in its shares.

For example, last week Morgan Stanley put an equal-weight (hold) rating on its shares with a price target of $46.30.

Although this is only a hold rating, its price target still implies potential upside of almost 13% for investors over the next 12 months.

In addition, Morgan Stanley is forecasting a fully franked dividend yield of approximately 5.3% in FY 2025. This boosts the total potential return to approximately 18%.

Elsewhere, the team at Morgans responded to BHP's fourth quarter update by reaffirming its add rating with an improved price target of $49.20. This suggests that upside of approximately 20% is possible for investors buying at current prices.

And with Morgans forecasting a dividend of approximately $2.00 per share in FY 2025, which equates to a 4.9% dividend yield, the total potential return could be as much as 25%.

Attractive valuation

Another broker that thinks BHP stock is attractively priced is Goldman Sachs. Last week, its analysts reiterated their buy rating and $48.40 price target on its shares. The broker commented:

Attractive valuation, but at a premium to RIO: BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8xNAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).

One of the key reasons that the broker is bullish on BHP is its exposure to copper. It expects the miner's copper earnings to increase materially in FY 2025. It said:

We remain bullish on copper and expect BHP to generate US$7.7bn in copper EBITDA in FY24 (30% of EBITDA) and increasing to US$11.7bn in FY25 (42% of EBITDA) due to ongoing supply side challenges and increasing demand.

This is expected to underpin a fully franked dividend of US$1.23 per share in FY 2025, which represents a 4.5% dividend yield at current exchange rates.

Overall, analysts appear to believe that recent weakness from BHP stock could have created a buying opportunity for investors looking for mining sector exposure.

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 positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

More on Materials Shares

A young man punches the air in delight as he reacts to great news on his mobile phone.
Materials Shares

Guess which ASX 200 stock is ending the week with a bang thanks to Rio Tinto

This stock has won a major contract from the mining giant.

Read more »

A man wearing a hard hat and high visibility vest looks out over a vast plain where heavy mining equipment can be seen in the background.
Materials Shares

Is it time to buy ASX lithium shares?

Lithium prices continue to sink. Has this created a buying opportunity?

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.
Materials Shares

Mineral Resources shares sink on Onslow Iron blow

This miner is having a tough session. Let's find out why.

Read more »

A man sits in a chair hunched over a laptop and covered head to toe in frozen icicles to represent Envirosuite's trading halt
Materials Shares

MAC Copper shares in trading halt as miner flags 'potential control transaction'

MAC Copper shares are frozen while Sandfire Resources shares are the fastest risers of the ASX 200 today.

Read more »

A young man pointing up looking amazed, indicating a surging share price movement for an ASX company
Materials Shares

Bell Potter says this ASX lithium stock could rise ~50%

The broker has just put a buy rating on this lithium stock.

Read more »

A woman stands next to a large green battery smiling and eating an apple with a lifting green arrow line in the background, indicating rising stock prices.
Share Market News

Are Liontown Resources shares a buy, hold or sell according to Macquarie?

Here’s what the broker has to say about this Lithium miner. 

Read more »

A man wearing a shirt, tie and hard hat sits in an office and marks dates in his diary.
Materials Shares

Rio Tinto share price tumbles on CEO bombshell news

The mining giant is now looking for a new leader.

Read more »

a mine worker holds his phone in one hand and a tablet in the other as he stands in front of heavy machinery at a mine site.
Materials Shares

What's going on with the Fortescue share price today?

This mining giant is making changes to its leadership.

Read more »