New Hope Corporation Limited (ASX:NHC) shares soared more than 6% to hit a new 52-week high of AU$5.85 on September 15. The stock has gained more than 174% since the beginning of 2022.
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Brisbane-headquartered New Hope Corporation runs a coal mining business. It has been in operation since 1986. The company is profitable and its stock currency offers an above-average dividend yield of 4.78%.
ASX coal shares shine on a big day for energy companies
New Hope Corporation shares surged alongside Whitehaven Coal Ltd (ASX:WHC), another coal mining stock that hit a new 52-week high. It was a great day for ASX energy shares investors as the S&P/ASX 200 Energy [XEJ] index rose almost 4% and helped lift the broader stock market.
Why the excitement over coal shares?
Although coal is dirty from an environmental perspective, it remains an important energy resource. It is cheap and abundant. Amid increasing electricity demand and gas supply disruptions due to the war in Ukraine, many countries are turning to coal to meet their energy needs.
As such, a number of countries in Europe are restarting their coal power plants. India is also going to need more thermal coal in the coming years as it expands its coal-fired power capacity.
According to the International Energy Agency, global coal consumption is set to rise almost 1% in 2022 to match record levels set in 2013. The growing demand for coal is also lifting the commodity’s price, which bodes well for coal producers such as New Hope Corporation. Australia is a leading coal exporter, selling to heavy coal consumers such as China and India.
New Hope Corporation share price forecast
According to TipRanks’ analyst rating consensus, NHC stock is a Hold. The stock has a high price forecast of AU$7.90, which indicates 35% upside. However, the average New Hope Corporation share price target of AU$4.88 implies over 16% downside potential.
Although NHC stock seems to have run ahead of analysts’ average price prediction, its TipRanks insights continue to lean bullish. For example, New Hope Corporation share scores a “Perfect 10” from TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.
Moreover, the stock is receiving favourable mentions on financial blogs. TipRanks data shows that financial blogger opinions are 97% Bullish on NHC, compared to a sector average of 75%.
Final thoughts
Although coal businesses may be lucrative now, there remains risks ahead. The global efforts to combat climate change may diminish demand for coal in the long-term, as economies shift to solar, wind, and other renewable energy resources.
For example, Australia’s major coal customers such as South Korea, Japan, and Taiwan plan to decarbonise their economies by 2050 and 2060. As a result, Australia could see a substantial drop in its coal exports to those markets, which could be a blow to companies like New Hope Corporation.
However, many fossil energy companies are taking advantage of their profits now to invest in renewable power projects. Therefore, coal companies like New Hope Corporation still have an opportunity to pivot into clean energy.
