BHP Group Ltd (ASX: BHP) shares closed down 0.6% on Friday, trading for $43.50 apiece.
That sees shares in the S&P/ASX 200 Index (ASX: XJO) mining giant up a slender 1.3% over 12 months.
Though we shouldn't ignore the two fully franked dividends, totalling $1.71 a share, that the miner paid eligible stockholders over the year. At Friday's closing price, BHP shares trade on a fully franked trailing dividend yield of 3.9%.
As for 2025, shares in Australia's biggest miner notched 52-week lows on 9 April, but have since rocketed 27.3% from those lows. That rebound has been driven, in part, by resilient demand (and the resulting strong prices) for copper and iron ore, BHP's top two revenue earners, amid a recovery in China's economic outlook.
Iron ore was trading for US$105.30 per tonne on Friday, up 5% in 2025. The industrial metal hit lows of US$93.00 per tonne in early July, but came roaring back despite many analysts predicting it would keep heading lower.
Copper has had a tremendous run, trading for US$10,647 per tonne on Friday, up 21.4% in 2025, according to data from Bloomberg.
Which brings us back to why Macquarie Group Ltd (ASX: MQG) thinks BHP shares could be materially undervalued.
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How BHP shares could surge 54%
In a new Australian mining stocks report released this week, Macquarie detailed the significant potential upside for BHP shares if the current spot prices for iron ore and copper are maintained through 2026.
The broker said that spot prices for iron ore are 24% higher than its existing estimates for calendar year 2026, while the spot prices for copper are 14% higher.
"With the tariff rhetoric invoking a bulk, base and new energy pull back, there is still spot upside to consensus and MQe," Macquarie added.
Under its existing estimates, Macquarie has a neutral rating on BHP shares with a price target of $42.00. That's 3.4% below Friday's closing price. The broker also estimates a BHP dividend yield of 3.9%.
But if spot prices should prevail into 2026, Macquarie's price target for BHP rises to $67.00 a share. That represents a potential upside of 54% from Friday's close. Under this scenario, the broker expects BHP's dividend yield to be 5.2%.
A caution on risks
Cautioning on the risks to its base case and spot case assumptions for BHP shares, Macquarie noted:
Movements in iron ore, copper, and coal prices present the most significant upside and downside risks to our earnings forecasts and valuation. We make assumptions within our forecasts for production, capex, and operating costs (opex) in addition to exchange rates.
Variances in these assumptions versus our base case present material risks both to the upside and downside to earnings forecasts and valuation. Thematically, the accelerating ESG momentum and potential carbon tax could introduce further valuation downside risks, which are reflected in a higher cost of borrowing and multiple compression.
