Down 14% in a month, what's next for the BHP share price?

BHP has been suffering. Is it about to dig itself out of this hole?

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Key points

  • The resources giant BHP is seeing major volatility with its share price
  • Concerns are rising about a potential global recession
  • But, some brokers (and I) rate it as a buy, with a good dividend yield expected

The BHP Group Ltd (ASX: BHP) share price has been hurting over the last few weeks. It's down 14% in the past month.

How does that compare to the S&P/ASX 200 Index (ASX: XJO)? The ASX 200 has fallen 7%. That's interesting considering BHP is such a large proportion of the ASX 200 — it's around 10% of the index.

A lot of the fall happened yesterday when BHP slumped by more than 5%.

Can things turn around? Let me just consult my crystal ball here…

Volatile commodities

There are a few key things that affect BHP's share price and profit.

General market sentiment can really affect the share price, as we saw during the COVID-19 crash. But then there are more specific things for BHP, such as commodity prices and its production volumes, that can also influence investor sentiment.

BHP has a portfolio of different commodities, including iron ore, copper, coal, and so on.

There are certainly concerns about what a global recession could do to resource prices. The iron ore price has dropped from above US$150 per tonne earlier this year to under US$100 per tonne. However, how much further are the commodity prices going to drop?

It's hard to say. But, the longer-term outlook for some of its commodities looks promising in a decarbonising world. Copper and nickel are needed for electric vehicles and electrification, and potash is a 'greener' fertiliser.

Do experts think the BHP share price is an opportunity?

The broker Macquarie certainly does, with an outperform rating. Earlier in September, Macquarie increased its price target on BHP to $42, implying a rise of around 16% from the current level of $36.20. It notes that BHP's earnings are benefiting from the strong coal prices.

Another broker, Morgan Stanley, is equal-weight on the business, which is like a hold. However, the price target is $43.20 – this implies a possible rise of almost 20%. The broker thinks that some miners look good value and that higher resource prices can help BHP.

However, Credit Suisse is not so convinced, with a price target of $36. That implies no movement over the next year. It is cautious about where copper and iron ore prices could move in the short term. The broker thinks that BHP wants to find an acquisition.

My take on the BHP share price

The last 12 months alone have seen plenty of volatility for the big resources business.

I think it's great at what it does and, at the right price, I believe it's worth thinking about because of its ability to make big profits in the good times. The low share price comes when there are shorter-term concerns about commodity prices and demand.

With a solid dividend expected even as profits fall, I think it could be worth owning BHP shares during this period of uncertainty.

The dividend per share estimate on CMC Markets for FY24 is $2.79, which equates to a grossed-up dividend yield of 11% at the current BHP share price. I think BHP's greener-focused portfolio has a promising future, so I'd be happy to use the current weakness to buy a parcel of shares and consider buying more if it dropped further.

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 Scott Phillips.

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