Copper MCX Above 600 buy 100—500 Lots For target 612——618 SL PAID. Copper prices have been surging this year, and with no sign of that trend reversing, analysts are bullish on Phoenix-based international mining giant Freeport-McMoRan Inc.
Copper hit its highest price since March 2013 this month, up nearly 25% year over year. That is also 65% higher than its springtime low during the early days of the Covid-19 pandemic.
“This current price strength is not an irrational aberration, rather we view it as the first leg of a structural bull market in copper,” Goldman Sachs analysts said in a research note earlier this month.
The note cited increased orders from China and expectations that copper will be an important component in new green energy projects. In addition, the metal is used in most construction projects and in household appliances, making its price a bellwether for the economy, the note said.
Goldman raised its 12-month forecast for copper to $9,500 per metric ton, which was a rise from the previous estimate of $7,500.
Stable outlook
Earlier this month, Moody’s changed its outlook on Freeport-McMoRan (Nasdaq: FCX) from negative to stable.
Carol Cowan, Moody’s senior vice president and lead analyst for Freeport-McMoRan, cited the company’s improved cost position at its Grasberg mine in Indonesia — where it is been shifting to an emphasis on underground operations in recent months — and its restored production at the company’s operations at the Cerro Verde mine in Peru after government restrictions amid the pandemic.
“The change in outlook to stable reflects the significant improvement in FCX’s performance in the second half of 2020,” Cowan said in a Moody’s note. “The continued maintenance of an excellent liquidity profile also supports the outlook change and the rating affirmation.”
In its most recent quarterly report in October, Freeport-McMoRan said its year-over-year third quarter revenue increased more than 16% thanks to stronger-than-expected copper and gold sales.
That prompted CFRA Research at the time to upgrade the company’s status to a strong buy, an opinion it maintained earlier this month when it increased its 12-month target price by $6 to $29. That’s $13 higher than CFRA’s target before the Q3 report.
Matthew Miller, an analyst at CFRA, also cited rising copper prices and the ramp-up in Indonesia. He also mentioned increased production at the Lone Star Mine in Arizona.
‘“FCX is poised to generate strong free cash flow in ’21 and continue to strengthen its balance sheet. CFRA has a positive outlook for copper markets in the near term, driven by the robust economic recovery in China and the positive outlook for a Covid-19 vaccine,” Miller wrote in a report. “Copper’s role in decarbonization should drive significant incremental demand; the rates of adoption for renewable energy and electric vehicles (which are copper-intensive) continue to expand rapidly. We forecast every $0.10/lb. change in copper price increases FCX’s annual EBITDA by $400 million.”
