Is Newcrest Mining (ASX:NCM) set to start a share buyback in 2022?

The recent pullback in Newcrest's share price could present an opportunity, this broker says.

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Key points

  • Newcrest shares fell hard in January following the release of the company's quarterly results
  • One broker reckons that Newcrest could be positioned to start a share buyback program in 2022
  • In the last 12 months the Newcrest share price has lost more than 8% and is down over 3% this year to date

Shares in gold mining giant Newcrest Mining Ltd (ASX: NCM) have started the week trading up more than 5%. At the time of writing, the Newcrest share price was fetching $23.92 in morning trade on Monday.

Newcrest fell hard in late January following the release of its quarterly report for the three months ending 31 December 2021.

Investors dumped the stock and, consequently, it bottomed at 52-week lows of $21.50 to close the month. Prior to that, it had been rangebound, with no real price action up or down since August.

The tug-of-war continues today. But one broker reckons Newcrest has a few tricks up its sleeve in order to drive value for shareholders once more. Let's take a look.

Newcrest to repurchase shares in 2022?

According to analysts at Credit Suisse, investors should consider the possibility of Newcrest approving a share buyback program over the coming periods.

Share buybacks have picked up in recent years. S&P Global reported that 2021 was a record year for companies repurchasing their own stock.

In the United States for instance, during the third quarter of 2021, share repurchases were worth $234.6 billion. That's an 18% gain from the previous quarter and 130% on Q3 2020.

Credit Suisse analysts reckon that a buyback approval would add incremental value for shareholders. They also think it's feasible, seeing as Newcrest is well capitalised to put the cash aside.

"Whilst NCM has plenty of capital expenditure ahead to fund its high returning growth pipeline, it can comfortably fund this in our view," the broker said.

Although, the investment bank remains cautious on the integration of new chief financial officer Sherry Duhe. It notes the board might be more conservative in its capital budgeting for a smooth transition.

If this were to occur – and Newcrest was to commit to buying back its own stock – Credit Suisse reckons the gold miner could then instigate the program in August, when it reports full-year results.

Nevertheless, the broker is heavily bullish on Newcrest shares and values the company at $30 per share. It is joined by analysts at JP Morgan, Macquarie, Barrenjoey, Morgans, Shaw and Partners, Morgan Stanley, and Jefferies.

In fact, according to a list of analysts obtained from Bloomberg Intelligence, almost 70% of analysts covering the gold miner have it as a buy right now with an average price target of $28.86.

Newcrest share price snapshot

In the last 12 months the Newcrest share price has lost nearly 8% and is down 2.29% this year to date following its drop in January.

As such it has slipped 3% in the last month, but has regained support lately and climbed 6% into the green in the last week. Newcrest's share price closely tracks the movements of the price of gold, as shown in the chart below.

TradingView Chart

Motley Fool contributor Zach Bristow 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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