Extended rallies in steel and iron ore markets have spurred on shares of BHP Group Ltd (ASX: BHP) in 2022, such that the stock now trades 23% higher year to date.
The BHP share price bounced from a 3-month low on 12 May of $40.02 to finish at $45.61 in yesterday's session.
Meanwhile, the price of iron ore has levelled off in recent weeks and now trades 2% down over the past month. Steel prices have also tumbled 14% from former highs of $1,075 per tonne on 5 May to rest at $922 per tonne at the time of writing.
Sentiment appears mixed
Despite the relief rally BHP shares exhibited in May, it appears as though market pundits are still cautious on what direction the resource giant's share price will head next.
Analysts at Barclays investment bank are constructive on the stock and rated it equal weight in a recent note, expecting the stock to "underpin [a] longer-term premium".
"We expect BHP to be supported by two factors," Barclay's analysts wrote.
"[F]irstly that once BHP goes ex the petroleum sale distribution, it is set to leave a relatively attractively valued BHP ex-petroleum…".
"Secondly," they remarked, "with BHP having 100% of market cap listed in Australia following the unification earlier this year, we expect BHP's London line to re-rate over time…"
Meanwhile, JP Morgan reinstated coverage of BHP shares with a neutral stance, having formerly suspended its rating on the stock.
The broker values BHP at $46 per share, having recently updated its 'iron ore scorecard' for the mining giant.
"BHP has established a solid iron ore track record over recent years, which will become even more important post the Petroleum exit, given the increased focus," JP Morgan said.
Referencing the 'scorecard', the broker wrote that, compared to other players in the space, "BHP's 10yr scorecard is more balanced, with 3 years showing upward revisions (twice in FY14), 3 downgrades, and 1 year where the range was narrowed".
"Importantly," JP Morgan argued, "guidance was achieved over FY20/21 and FY22 guidance [at 278–288Mt] looks comfortable".
According to Bloomberg data, 10 analysts covering the stock have it rated as a buy, whereas 14 analysts rate it a hold. There are five analysts on this list urging clients to sell BHP shares.
The consensus price target is $43.62 per share, indicating the potential for a small correction should that number be correct.
In the last 12 months, the BHP share price has clipped a 3.3% gain.
