UBS has shifted its stance on Northern Star Resources (ASX:NST), transitioning the stock rating from Buy to Neutral while decreasing the price target from AUD 29.45 to AUD 26.90. Northern Star Resources, a prominent player in the gold mining sector with a market capitalization of approximately $27.2 billion, is currently valued close to its annual high, although some analysis indicates a modest overvaluation.
This re-rating follows the release of the company’s December quarter production figures, which fell short of expectations at 348,000 ounces. On January 2, 2026, Northern Star also revised its fiscal year 2026 production guidance downwards to a range between 1,600,000 and 1,700,000 ounces.
Further complicating the outlook, Northern Star updated its fiscal year 2026 cost estimates earlier this week, raising anticipated expenses to between A$2,600 and A$2,800 per ounce. The latest quarterly report provided additional insight into these rising costs, noting a rise in All-In Sustaining Costs (AISCs) by 8-15% alongside higher growth capital expenditures. Despite these headwinds, data from InvestingPro reveals that Northern Star retains a low PEG ratio of 0.29, suggesting the stock’s price-to-earnings ratio remains low in relation to expected near-term earnings growth.
UBS has adopted a more conservative forecast, predicting a production volume of around 1,530,000 ounces, which sits below the company’s lower guidance threshold. Meanwhile, projected costs have been raised to approximately A$2,850 per ounce, surpassing the company’s own high-end estimate. Investors should also take note that Northern Star offers a dividend yield of 2.1%, supported by a manageable debt profile evidenced by a debt-to-equity ratio of only 0.11.
One significant concern highlighted by UBS is ongoing execution risk tied to Northern Star’s growth strategy. The bank has incorporated a further six-month delay at the firm’s Hemi project within its models, adjusting capital expenditure upwards to roughly A$2.8 billion and deferring first production to the first half of fiscal year 2030. These adjustments have led to an 12% reduction in expected earnings per share for fiscal 2026 and an 11% cut for fiscal 2027.
Notwithstanding these operational and financial challenges, Northern Star sustains a "GREAT" overall financial health score of 3.4 according to InvestingPro’s comprehensive evaluation framework, which analyzes more than 1,400 stocks and transforms complex financial data into actionable insights for investors.
In related developments, Northern Star released its fiscal 2026 second-quarter earnings, emphasizing robust operational focus amid production hurdles. The company maintains a solid cash reserve position and continues to advance strategic projects aimed at driving future growth. The share price remained stable in after-hours trading following the earnings announcement, reflecting investor steadiness despite recent challenges.
The unfolding scenario underscores Northern Star’s dual commitment to sustaining financial stability while managing the risks posed by growth initiatives and cost pressures during a turbulent market environment.