BHP Group Ltd (ASX: BHP) stock has been under the pump this year.
So much so, the mining giant's shares have just dropped to a new 52-week low of $41.08 on Wednesday.
While this is disappointing for the Big Australian's shareholders, could it be a buying opportunity for the rest of us? Let's see what brokers are saying about the mining giant as we approach the month of August.
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BHP stock: Buy, sell, or hold?
The good news is that the broker community is largely positive on the mining giant and sees value in its shares.
For example, last week Morgan Stanley put an equal-weight (hold) rating on its shares with a price target of $46.30.
Although this is only a hold rating, its price target still implies potential upside of almost 13% for investors over the next 12 months.
In addition, Morgan Stanley is forecasting a fully franked dividend yield of approximately 5.3% in FY 2025. This boosts the total potential return to approximately 18%.
Elsewhere, the team at Morgans responded to BHP's fourth quarter update by reaffirming its add rating with an improved price target of $49.20. This suggests that upside of approximately 20% is possible for investors buying at current prices.
And with Morgans forecasting a dividend of approximately $2.00 per share in FY 2025, which equates to a 4.9% dividend yield, the total potential return could be as much as 25%.
Attractive valuation
Another broker that thinks BHP stock is attractively priced is Goldman Sachs. Last week, its analysts reiterated their buy rating and $48.40 price target on its shares. The broker commented:
Attractive valuation, but at a premium to RIO: BHP is currently trading at ~6.0x NTM EBITDA (25-yr average EV/EBITDA of 6.6x), a slight premium to RIO on ~5.5x; and at 0.9xNAV vs RIO at 0.8xNAV. Over the last 10 years, BHP has traded at a ~0.5x premium to global mining peers. We believe this premium can be partly maintained due to ongoing superior margins and operating performance (particularly in Pilbara iron ore where BHP maintains superior FCF/t vs. peers).
One of the key reasons that the broker is bullish on BHP is its exposure to copper. It expects the miner's copper earnings to increase materially in FY 2025. It said:
We remain bullish on copper and expect BHP to generate US$7.7bn in copper EBITDA in FY24 (30% of EBITDA) and increasing to US$11.7bn in FY25 (42% of EBITDA) due to ongoing supply side challenges and increasing demand.
This is expected to underpin a fully franked dividend of US$1.23 per share in FY 2025, which represents a 4.5% dividend yield at current exchange rates.
Overall, analysts appear to believe that recent weakness from BHP stock could have created a buying opportunity for investors looking for mining sector exposure.
