Why Are Analysts Turning Around on Vale?


Aug. 10 2019, Updated 7:37 a.m. ET

Vale’s shift in ratings

Among the three major seaborne iron ore miners we’re discussing in this series, Vale (VALE) stock has the highest percentage of “buy” ratings from 78% of the analysts covering it. The stock has seen a significant shift in ratings over the last year.

At the end of April, 56.0% of analysts had “buy” ratings on the stock. Approximately 18.0% of analysts have given it “holds,” and 4.0% have given it “sells.” Vale’s target price suggests a potential 32% upside based on its current market price.

Among Vale’s peers (XME), Cleveland-Cliffs (CLF) has the highest implied upside of 65.0%. The target prices for Freeport-McMoRan (FCX), BHP Billiton (BHP), and Rio Tinto (RIO) imply changes of 54%, 7.6%, and 12.2%, respectively.

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Rating changes for Vale

Overall, the analyst sentiment for Vale has been positive. Its stock has seen six upgrades (including “buy” initiations) in contrast to three downgrades in 2018. In 2017, eight analysts upgraded the stock. Analysts are mostly positive about the company’s deleveraging policy, which has been priced into the stock.

Upgrades and downgrades

Vale’s latest rating change came Macquarie, which upgraded it from a “neutral” to an “outperform” on December 11.

UBS also upgraded the stock from a “sell” to a “neutral” on October 31, while Citigroup downgraded Vale from a “buy” to a “neutral” on October 29.

On September 17, RBC Capital downgraded Vale from a “neutral” to an “underperform.” As reported by The Fly, RBC Capital analyst Tyler Broda said, “While the management has done a ‘tremendous job’ in ‘stabilizing the company, reducing capex and de-gearing the balance sheet,’ he is negative over the short term as long as expectations of iron ore demand from China remain uncertain.”


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