Why Did JPMorgan Recently Downgrade Rio Tinto?



Analysts’ ratings for Rio Tinto

Of the 14 analysts covering Rio Tinto (RIO) stock, 64.3% have given it “buy” ratings. Compared to the end of June 2017, the percentage of “buys” on Rio Tinto has fallen from 80%. 

Currently, 28.6% of analysts have “holds” on Rio Tinto, while the remaining 7.1% of analysts recommend “sells” on the stock.

Compared to Rio, BHP Billiton (BHP) and Vale (VALE) have each received “buy” recommendations from 61.1% and 65.2% of analysts, respectively. Cleveland-Cliffs (CLF), which is mainly exposed to the US (SPY) (SPX) domestic market, has “buy” recommendations from just 22% of analysts.

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JPM’s downgrade

We saw in a previous article that JPMorgan Chase (JPM) upgraded BHP on December 14, 2017. On the same day, JPM downgraded Rio stock from an “overweight” to a “neutral” rating. JPM analyst Fraser Jamieson believes that the stock’s valuation is more or less full and most of its positives have already been priced in.

Citigroup (C) reiterated its “buy” rating on Rio Tinto on December 5, 2017.

Société Générale upgraded Rio from a “hold” to a “buy” rating on November 8, 2017. It also raised the stock’s target price from 36 British pounds to 44 pounds. Analyst Sergey Donskoy increased Rio’s valuation along with those of other diversified miners, citing a stronger commodity price (COMT) outlook. Donskoy also noted that Rio was his second top pick behind Glencore (GLNCY).

On October 23, 2017, RBC (Royal Bank of Canada) Capital Markets downgraded Rio to a “sector perform” from an “outperform.” RBC analysts believe that the company’s strong balance sheet and high-quality growth projects have already been factored in to its stock price.


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