Freeport-McMoRan (FCX), the leading US-based copper miner (XME), is trading with gains of 5.5% as of 11:55 AM EST. Southern Copper (SCCO) and First Quantum Minerals (FM) have gained 1.6% and 1.4%, respectively. BHP Billiton (BHP) and Rio Tinto (RIO) have gained 1.3% and 1.2%, respectively. Let’s see why Freeport is surging today.
Morgan Stanley upgrade
Today, Morgan Stanley raised Freeport to “overweight.” However, the brokerage lowered its target price from $16 to $14. Morgan Stanley has turned bullish on copper. To be sure, analyst opinion has been mixed on copper. While Citi is bullish on the red metal, Barclays is in the bearish camp.
Nonetheless, there’s little denying that copper’s outlook looks better than some of the other industrial metals that are plagued with chronic oversupply especially in China. Freeport has a portfolio of high-quality copper assets with considerable organic growth opportunities including the Americas.
Furthermore, the company has settled ownership issues with the Indonesian government for its Grasberg operations, although some of the issues like environmental claims are still outstanding. While Freeport looks reasonably priced on 2019 and 2020 multiples, one might have to look beyond 2020 for value in Freeport. Having said that, in an industry as volatile as copper and especially with bears weighing in a possible recession in the medium term, investors might want to play it safe with Freeport. Read Why 2019 Looks to Be a Tough Year for Freeport-McMoRan for more information.