Why Do Analysts Love Vale SA?

The word on Wall Street

The number of analysts recommending a “buy” for Vale (VALE) has increased in the last few months. Currently, 73.0% of the analysts covering Vale stock recommend a “buy,” compared with 56.0% at the end of April. Approximately 23.0% of analysts recommend a “hold,” and 4.0% recommend a “sell.” Vale’s target price implies a 17.0% upside based on its current market price.

Why Do Analysts Love Vale SA?

Among Vale’s peers (XME), Freeport-McMoRan (FCX) has the highest implied upside of 43.0%. The target prices for BHP Billiton (BHP), Rio Tinto (RIO), and Cleveland-Cliffs (CLF) imply changes of 9.4%, 26.1%, and 21.7%, respectively.

Rating changes for Vale

Overall, the analyst sentiment for Vale has been positive. Its stock has seen three upgrades (including “buy” initiations) in contrast to just one downgrade. In 2017, the stock saw eight analyst upgrades. Analysts are mostly positive about the company’s deleveraging policy, which has been priced into the stock.

Upgrades and downgrades

On July 24, Clarkson Capital upgraded Vale from “neutral” to “buy.” On June 26, Macquarie also upgraded Vale from “neutral” to “outperform.”

As reported by The Fly, Macquarie analyst Grant Sporre believes that the global growth backdrop remains supportive despite trade war risks. Macquarie’s commodity strategists upgraded most of their commodity forecasts except for precious metals.

On April 24, RBC Capital Markets downgraded Vale from “outperform” to “sector perform.” According to The Fly, RBC analyst Tyler Broda noted that although Vale is in a “robust and improving structural position,” he expects iron ore markets to be pressured due to subdued growth from China.