Why did the Evolution share price freefall 38% in June?

It’s been another disappointing month for Evolution shares.

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Key points

  • Evolution shares tanked 38% last month to finish at $2.38 
  • Several macro environmental trends such as the ailing price of gold is dragging down the Evolution share price 
  • UBS thinks that the gold miner's shares are undervalued, giving it a buy rating with a 12-month price target of $4.05 

A month of volatile trading conditions led the Evolution Mining Ltd (ASX: EVN) share price to sink 38% last month.

At the start of June, the gold miner’s shares picked up from $3.84 but finished at $2.38 on June 30.

Across the sector, the S&P/ASX 200 Resources (ASX: XJR) index declined by roughly 11% over the same time frame.

Nonetheless, the beginning of July has led Evolution shares to trade sideways as investors remain cautious for the time being.

At the time of writing, the mining outfit’s shares are up 4.20% at $2.48.

What impacted Evolution shares in June?

Investors sold off the Evolution share price following concerns about further market falls in 2022 along with a business update.

A downbeat economic outlook impacted by rampant inflation and rate hikes by major central banks weighed on investor sentiment.

This led to consumer confidence dropping to a 16-month low in the United States, whilst GDP contracted 1.6% for the first quarter of 2022.

However, a business update released by the company on June 27 drove Evolution shares to plummet almost 22%.

An expected fall in annual gold production along with higher all-in-sustaining-costs (AISC) will drag down its FY22 guidance.

Subsequently, the price of gold continued to tread lower, fetching just above the psychological US$1,800 barrier.

This means that a decline in the price of the yellow metal translates to a loss of potential revenue for Evolution.

It appears that investors have been turned off by the company’s misfortunes with heavy trading volumes occurring last week.

Evidently, this has put selling pressure on Evolution shares as investors seek better risk/reward opportunities.

Is now the time to buy into the Evolution share price?

The Evolution share price could be trading at attractive levels. As reported by my Foolish colleague, Brendon, UBS upgraded its rating on the miner’s shares to a buy.

The broker believes there is still significant value in Evolution and has put a 12-month price target of $4.05.

Based on the current share price, this represents a 63% upside for investors.

Evolution commands a market capitalisation of approximately $4.55 billion.

Motley Fool contributor Aaron Teboneras 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 Scott Phillips.

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