Should you buy Agnico Eagle stock after receiving an upgrade from RBC?

On Wednesday, RBC Capital Markets analyst Josh Wolfson upgraded Agnico Eagle Mines Ltd (NYSE:AEM) shares to outperform from sector-perform. As a result, AEM shares edged higher by 1.23%, extending this week’s gains to 4.66%.

The analyst said Agnico could reap several benefits from its merger with Kirkland Lake Gold Ltd (NYSE:KL), thereby improving its asset quality and balance sheet positioning. Therefore, AEM could gain near-term catalysts thus, boosting its upside potential. 

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Haywood Securities analyst Kerry Smith echoed Wolfson’s views saying the merger, which could potentially be the last of its size in the Canadian mining sector, makes strategic sense.

AEM shares are down nearly 30% this year, thereby creating an exciting opportunity to buy.

Agnico stock looks undervalued

From a valuation perspective, Agnico trades at a compelling P/E ratio of about 17.24, making the stock attractive to value investors. However, analysts expect its earnings per share to grow by 6% this year before rising at an average annual rate of 2.60%. 

Therefore, growth investors may find it less appealing, thereby opting for alternatives. Nonetheless, when you factor in Wednesday’s merger with Kirkland Lake Gold, the picture begins to look more exciting, potentially boosting the upside potential.

At the current price of about $53 per share, RBC’s price target of $63 implies an upside potential of nearly 19%.

Can the rebound continue?

Technically, AEM shares appear to be trading within a descending channel formation in the intraday chart. However, the stock has recently bounced back to recover from oversold conditions. 

Therefore, with shares far from reaching overbought conditions, the current rebound seems poised to continue. Thus, investors could target extended rebound profits at $55.56, or higher at $58.80.

On the other hand, $50.82 and $47.78 are crucial support levels.

There is time to buy AEM stock

In summary, although Agnico Eagle Mines stock appears to have spiked recently, the share price is yet to reach overbought conditions, thereby leaving room for more upward movement.

Therefore, it may not be too late to buy the rebound amid AEM’s merger with Kirkland lake Gold.

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