SBSW Stock Is About to Make a Huge Move, 4 Things to Know
SBSW stock looks to be setting up for another run after pulling back from a near 80% run. The precious metal mining powerhouse is pulling back after an explosive run, creating a buying opportunity.
Sibanye-Stillwater (NYSE: SBSW) is one of the world’s largest mining companies, with significant operations in the U.S. and South Africa. For example, Sibanye is the worlds:
- No. 1 producer of platinum
- No. 2 producer of palladium
- And No. 3 producer of gold.
With Russia being a major metal supplier, prices are soaring as uncertainty hits the market. In fact, Russia supplies about 40% of the world’s palladium and close to 10% of platinum.
With this in mind, Sibanye looks to take on a more prominent role with increasing industry use for its products.
At the same time, worker strikes threaten the company’s profits with closed mines. Then again, the ongoing worker tension may be part of the reason SBSW stock is pulling back.
Is now the time to buy SBSW stock before the next major rally? Keep reading to find out.
No. 4 Sibanye Stillwater will Play a Critical Role in the Future
Although Sibanye is already a vital part of society, the miner will likely play a larger role in the future. With demand for precious metals heating up, the company is stepping up to fill the supply gap. Several trends are creating ample opportunity for SBSW to take advantage of.
Renewable Energy: According to the International Energy Agency (IEA), people are transitioning to renewable energy at an accelerating pace. Annual renewable capacity additions rose 45% in 2020. Moreover, renewables accounted for 90% of new power capacity in the past two years.
Platinum group metals (PGM) power renewable energy sources. In particular, PGM is useful in solar and wind energy, two of the fastest-growing clean energy sources.
Electric Vehicles: The transition toward electric vehicles (EV) is accelerating. For example, global EV sales grew another 108% in 2021 after exploding on the scene the past several years. But, more important, industry leaders are expecting EVs to make up over half of total auto sales by 2030.
Again, PGMs are used in EVs to supply energy and reduce emissions. PGMs are best known for their critical role in reducing emissions in catalytic converters. Yet their high melting point and ability to conduct energy make them an ideal match with EV batteries.
No. 3 SBSW Stock Setting up for a Run?
Right as SBSW stock looked to be breaking out into all-time high territory, it hit a wall over $20. Since then, share prices have given back almost 20%. But the pullback is healthy after running close to 80% from its December lows.
At the same time, the recent pullback is giving the 20-day SMA a pause while the 50-day SMA surges ahead. The change in trend can be a bullish sign as we advance.
We will see the 200-day SMA curve upward if the trend continues, suggesting an upward trend confirmation. On top of this, the pullback is completing the cup and handle pattern forming since the start of 2021.
A cup and handle chart pattern generally forms as a stock gains momentum and readies for its next leg up. Again, more confirmation is needed to confirm the trend change, but SBSW stock looks ready so far.
Lastly, miners are among the strongest industries, with the SPDR S&P Metals & Mining ETF (NYSE: XME) gaining 47% YTD.
However, I believe this is just the start. Here’s why: Materials (metals & mining, construction, etc.) currently make up only about 2.5% of the S&P 500 Index (SPX). Between ’79 and ’81, the last time inflation raced above 8%, the materials sector nearly doubled its sector weight to 15%.
No. 2 A Sleeping Giant
After getting struck hard by the pandemic, Sibanye Stillwater is restructuring its business for long-term success.
For one thing, the company is transitioning to capture the growing demand for clean energy metals. Take a look at the company’s aggressive expansion this past year.
Keliber (Lithium): Sibanye now owns a 30% stake in the Finnish mining company, focusing on (EV) battery-grade lithium.
Sandouville (Nickel): Sibanye agreed to exclusive terms to acquire nickel processing facilities in France over the summer.
Rhyolite Ridge Project (Lithium): With 50% interest, the company has a joint venture in Nevada with the potential of becoming the largest lithium mine in the U.S.
New Century Resources (Zinc, Copper): After buying a 20% stake, Sibanye further diversifies its exposure to green metals.
As can be seen, the transactions above show the mining firm sees the opportunity in clean energy and is seizing it. Furthermore, Sibanye is developing a uranium strategy with nuclear power regaining its status as a clean energy source.
No. 1 Significantly Undervalued
Considering everything, there is significant value in SBSW stock. Compared to peers like Barrick Gold (NYSE: GOLD) and Gold Fields (NYSE: GFI), SBSW looks cheap.
If you compare price-to-earnings (P/E), SBSW is currently at 5.3 while GOLD (22.1) and GFI (17.4) are much pricier. Moreover, when considering free cash flow (FCF) compared to the current price (P/FCF), the evidence becomes even clearer.
- SBSW: 9.9
- GOLD: 34.5
- GFI: 97
Then again, it makes sense with Sibanye’s strong fundamentals why they are paying a hefty 10% dividend yield. Compared to Barrick’s 1.4% and Gold Fields’ 2%, the return is massive.
Finally, looking at a company’s earnings-per-share (EPS) growth is one of the best ways to determine profitability. SBSW has grown EPS 85% for the past five years while GOLD (15%) and GFI (35%) lag significantly. With this in mind, SBSW looks like a steal at current prices.
SBSW Stock Forecast: Is it Breaking Out?
Although SBSW is significantly undervalued compared to its peers, the worker strike is a reason for concern. Investors may be more hesitant with no resolution in sight.
The workers want higher wages with dangerous working conditions. At the same time, Sibanye doesn’t want to pay higher salaries amid volatile metal prices. If they were to do so, profits could suffer in the future.
However, there are still plenty of positives going for SBSW stock. The risk to reward seems low, especially given a 10% dividend yield.
With the company positioning itself for the future of clean energy, look for the earnings to continue accelerating. SBSW looks to be a safe bet with rising demand pushing metal prices higher. If Sibanye can come to fair terms with workers, SBSW stock is ready for a breakout run.