S&P/ASX 200 Index (ASX: XJO) gold stock Northern Star Resources Ltd (ASX: NST) has broadly underperformed its peers over the past year.
Over the last 12 months, the S&P/ASX All Ordinaries Gold Index (ASX: XGD) – which also contains some smaller miners outside of ASX 200 gold stocks – has gained 12.96% compared to a 4.58% gain for Northern Star shares.
And so far in 2024, the Norther Star share price is down 5.10%, closing yesterday trading at $13.02.
Meanwhile, the All Ords Gold Index is up 3.61% this calendar year.
But things could turn around for the miner's shares in the second half of 2024 and into 2025.
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Leading broker upgrades outlook for Northern Star shares
Citi analyst Kate McCutcheon has a bullish outlook on this recently underperforming ASX 200 gold stock.
This week, Citi upgraded Northern Star shares to a 'buy' rating from its prior 'neutral' rating
According to McCutcheon (quoted by The Australian), shares in Northern Star "now look cheap" compared to the historically high gold price.
The gold price has soared from US$2,057 per ounce on 2 January to US$2,368, up 15%.
And the broker is expecting more upside for the yellow metal. That bullishness stems from expectations of ongoing strong physical demand along with Citi's forecast of multiple interest rate cuts from the US Federal Reserve commencing in September.
Gold, which is priced in US dollars and pays no yield itself, tends to perform better in a low or falling interest rate environment.
With the recent underperformance and gold price forecast in mind, Citi raised its price target for the ASX 200 gold stock by 70 cents per share to $15.90. That's 22.1% above yesterday's closing price.
However, McCutcheon believes the rally in Northern Star shares is unlikely to eventuate until after the miner reports on its full FY 2024 results and delivers its FY 2025 guidance later this month. That's because she expects overly optimistic consensus expectations for FY 2025 will pressure the gold miner's shares.
According to McCutcheon:
With NST's recent underperformance the question is, how much is already priced in? We expect gold miners to print higher cost guidance and think consensus cost expectations are too low for both costs and capex…
Labour inflation has remained sticky, and several sites have specific issues to address next year like mills and fleet to replace, waste stripping to catch-up on. While cost margins have been expanding versus the gold price, it's at a lower pace.
