Could 2022 be a good year for the BHP (ASX:BHP) share price?

Is 2022 going to be a better year for the BHP share price?

| More on:
A fortune teller looks into a crystal ball in an office surrounded by business people.

Image source: Getty Images

It has been a mixed year for the BHP Group Ltd (ASX: BHP) share price. In 2021 to date, BHP shares have dropped by 4% to around $41.

However, BHP shares have fallen as low as approximately $35 and gone as high as $54 this year. Considering how big BHP is, that is a large valuation change over one year. Indeed, both the high and the low were felt in the second half of the year.

But what could happen to the BHP share price in 2022?

Brokers are somewhat mixed on the business’ prospects over the next year.

For example, analysts at UBS currently rate the business as ‘neutral’. However, the UBS price target of $37 is actually 10% lower than where it is today, suggesting a sizeable decline over the next 12 months.

UBS has noted the plan by BHP to unify its Australian and UK companies under the Australian business. The cost to do this is lower than it used to be and it will simplify the structure of the business, making it easier to do transactions such as the divestment of its oil business to Woodside Petroleum Limited (ASX: WPL).

The broker thinks that divesting the oil business is a good move because of the possibility of a future de-rating because of environmental concerns.

But at the positive end of various broker opinions, Macquarie Group Ltd thinks that it is a buy. Macquarie’s price target on the resources giant is $52, which is 26% higher.

Based on Macquarie’s earnings projections, the BHP share price is valued at 9x FY22’s estimated earnings and 13x FY23’s estimated earnings.

Macquarie thinks that steel demand is rising again in China over the last several weeks whilst inventory of steel drops.

Macquarie notes that BHP’s profit is reliant on commodity prices.

What is the resources outlook?

Macquarie has already mentioned that things are looking a bit better for iron ore, in the shorter-term at least. However, some brokers like UBS have said that they expect the iron ore price to settle lower over the next couple of years.

BHP itself said in August that it was anticipating a continuation of strong end-use demand conditions in China for steel and ongoing recovery in the rest of the world over the course of FY22. Iron ore has been a substantial influence for the BHP share price over the last year.

Copper prices have been strong and the short-term outlook for demand was “constructive”. In the longer-term, BHP said that both demand and supply factors indicate that copper is an attractive avenue for future growth.

BHP is also expecting nickel prices will benefit substantially from the global electrification mega-trend.

Potash prices are rising from both “favourable farm economics” and constrained supply. Over the longer-term, management expect that potash will benefit from the trends of rising population, changing diets and the need for sustainable intensification of agriculture.

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 over 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 January 13th 2022

Motley Fool contributor Tristan Harrison 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 recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Resources Shares

Woman looks amazed and shocked as she looks at her laptop.
Resources Shares

Why did the Cobalt Blue share price leap 5% this morning?

The Cobalt Blue share price has been exhibiting volatility lately. Here's why.

Read more »

A woman sits at her computer in deep contemplation with her hand to her chin and seriously considering information she is receiving from the screen of her laptop regarding the Xero share price
Broker Notes

Is the Fortescue share price cheap after dropping 10% in a month?

We check what brokers have to say on the iron ore giant.

Read more »

A drawing of a rocket follows a chart up, indicating share price lift
Share Gainers

Here’s why the Australian Strategic Materials share price is surging 31% today

The ASX rare earths and critical metals miner has come under selling pressure since hitting record highs in November last…

Read more »

Green arrow with green stock prices symbolising a rising share price.
Resources Shares

Why is the Core Lithium share price charging 7% higher?

Core Lithium shares are on fire on Monday...

Read more »

A miner in visibility gear and hard hat looks seriously at an iPad device in a field where oil mining equipment is visible in the background.
Resources Shares

Is the BHP share price too exposed to the downside risks of China?

This could be a pressing question for the miner.

Read more »

Miner holding cash which represents dividends.
Dividend Investing

How big will the Rio Tinto dividend be in 2022?

Let's analyse and find out.

Read more »

Female miner smiling while inspecting a mine site with another miner.
Resources Shares

Why did the South32 share price beat the other ASX 200 miners today?

The South32 share price was a standout today in the ASX resources sector. Here's why

Read more »

a man wearing a suit holds his arms aloft with a smile on his face attached to a large stylised lithium battery with green charging symbols on it.
Resources Shares

Why I think the Allkem share price is in the buy zone

Here's why I think Allkem is a lithium share to buy right now...

Read more »