According to consensus estimates compiled by Bloomberg, Southern Copper (SCCO) has a one-year price target of $27.82. This is 7.5% above its current stock price. Of the 23 analysts surveyed by Bloomberg, only four rated the stock a “buy,” while six rated it a “sell.” Most of the analysts rate the stock a “hold.”
The above graph shows Wall Street analysts’ recent action for Southern Copper. On August 26, HSBC upgraded the company to “buy” from “hold.” HSBC also raised Southern Copper’s one-year price target to $31.5 from $27.5. On August 23, Scotia Capital raised SCCO’s target price from $34 to $35, while maintaining its “sector perform” rating. FBR Capital Markets also raised Southern Copper’s one-year price target from $33 to $38 on August 22.
Pure-play copper producer
We should note that Southern Copper and Turquoise Hill Resources (TRQ) (RIO) are pure-play copper producers. Like Turquoise Hill Resources, Southern Copper is ramping up its copper production. Both of these companies’ unit copper costs are lower compared to some of their peers.
While other copper producers such as Freeport-McMoRan (FCX) are selling their copper assets, Southern Copper is in the midst of an aggressive expansion plan.
There’s a general consensus that the copper markets could be in a deficit by the end of the decade. However, copper could be in a surplus over the next few years. This is putting pressure on prices. You can read Why Copper Has Underperformed Other Metals This Year to look at the different factors that are driving copper’s recent underperformance.
In the next part, we’ll see how analysts rate Teck Resources.
Investors looking to diversify the risk of investing in a single security can also consider the SPDR S&P Global Natural Resources ETF (GNR). Almost a quarter of GNR’s holdings are invested in metal companies.