Jefferies Upgrades Royal Gold For Compelling Growth Potential

Investment bank Jefferies has upgraded Royal Gold Inc RGLD to a Buy rating, boosting its price target by 16%, from $154 to $178. The bank sees compelling growth potential from the streaming and royalty business leader for precious metals.

According to Jefferies analysts, Royal Gold could see a 10% hike in year-over-year sales, accompanied by growth from mines across the Americas. The largest contributions come from North America (40% of total revenue), followed by South America (35%) and Africa (25%). Royal Gold's unique business model ensures growth without substantial capital expenditures, as operator-funded expansions increase production.

Key growth catalysts include optimization and expansion at major mining operations. Highlights include increased throughput at the Mount Milligan mine in Canada and the ongoing ramp-up at the Barrick Gold's Pueblo Viejo mine in the Dominican Republic. Both projects could significantly increase the firm's long-term revenue growth.

Royal Gold also benefits from a healthy balance sheet, allowing it to pursue new deals and further optimize its portfolio. With minimal exposure to inflationary cost pressures due to its fixed-cost streaming agreements, the company is well-positioned for the current environment.

Interestingly, Jeffries forecasts an average of $2,658 per ounce in 2025, barely above gold's opening price for the year, $2,625. Although inflation fears have subsided and gold-backed BRICS currency hasn't materialized, central bank purchases provide support, reflecting the demand for gold as a safe-haven asset.

Even Goldman Sachs, which had a more optimistic $3,000 price target for 2025, recently moved the goalpost, seeing the price reach that level in mid-2026. They pointed at fewer than anticipated interest rate cuts as the main catalyst for the outlook.

Still, beyond the commodity’s price, which constitutes the largest part of its portfolio (75% in 2025), Royal Gold has more tools for generating value for its shareholders.

The firm recently announced a 12.5% increase in its quarterly dividend, raising it to $0.45 per share and giving it a forward yield of 1.4%. The payments have steadily risen over the last decade, and with a low 27% cash payout ratio, the firm has plenty of leeway to continue the practice.

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