BHP breakout, 50-MA support, and strong fundamentals pushing price to $62?

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on Aug 17, 2022
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  • BHP posted a 173% growth in earnings in FY22.
  • Investors have flagged higher costs and capex.
  • BHP breakout sets on a course to higher levels in the near term.

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Shares of BHP Group Limited (LON:BHP) traded up 4% on Tuesday after strong FY22 results. That was after the net profit rose 173% to close the year at $30.9 billion. The underlying attributable profit of the company was $23.8 billion, from the prior $17.1 billion.

Despite the robust FY22 results, analysts emphasized caution on BHP stock. Jefferies commented that BHP’s cash flow and returns remain robust. However, the macro outlook is a big concern. RBC Capital agreed with the Jefferies sentiment, saying that the focus will now be on higher costs and capex. RBC projects a downward revision of consensus estimates once the market digests the future cash flow outlook. 

A review of the financial report highlights expectations of higher costs due to inflation and study costs. BHP plans to offset the expenses through spending discipline and productivity improvements. Improved exchange rates are also expected to cut costs. 

While analysts forecast higher costs, they have a strong rating on the stock. Jefferies has a buy rating on BHP but warns of near-term volatility. The stock has a hold rating by 4 Wall Street analysts, with a target of $59. We believe the stock could hit $62 soon and is a buy/hold.

BHP stock breaks above a key resistance as it eyes $62 next

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Source – TradingView

BHP stock has cleared a key hurdle at $55 in an earnings-inspired rally. The 50-day MA has joined support for the first time since June. The momentum indicator points to a strong bullish BHP price. The next resistance for BHP is $62. The stock could face some correction at $59, the consensus estimate, and a minor resistance level.

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Summary

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BHP is a buy or hold in the near term. Strong fundamentals align with the technical indicators for bullish momentum. The next resistance is at $62.

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