During this time the mining giant’s shares have lost 20% of their value.
Is the weakness in the BHP share price a buying opportunity?
The good news for investors looking for options in the resources sector is that the team at Macquarie Group Ltd (ASX: MQG) believe the BHP share price is in the buy zone after this decline.
According to a note out of the investment bank this week, its analysts have retained their outperform rating and lifted their price target on the company’s shares to $55.00.
Based on the latest BHP share price of $41.73, this price target implies potential upside of 32% over the next 12 months before dividends.
And if you include the $3.60 per share fully franked dividend that Macquarie expects BHP to pay in FY 2022, this potential return increases to ~41%.
What did the broker say?
Macquarie’s most recent note focuses on the Jansen potash project, which has just been formally approved by management.
The broker believes this is just the start of a much larger commitment to the potash market. Which is a positive in Macquarie’s eyes. This is due to its positive view on the outlook for potash demand and pricing over the medium term.
Outside this, the broker has recently upgraded its oil and gas forecasts on the belief that prices will be supported by a longer than expected economic cycle.
And while its analysts acknowledge that BHP is merging its oil and gas operations with Woodside Petroleum Limited (ASX: WPL), it remains relevant as shareholders will own a slice of the new entity.
Overall, the broker doesn’t appear concerned by the recent pullback in iron ore prices and continues to forecast strong free cash flow and dividends in the coming years.
For this reason, it believes the BHP share price is good value at the current level.