Some aspects should be considered when assessing Freeport’s valuation. Its valuation looks high primarily due to the transition of its Grasberg mine from overground to underground operations, which could affect Freeport’s shipments and earnings this year and next. Although Freeport’s 2021 valuation appears to align with peers’, given the current macro uncertainty and copper’s volatility, that metric may be too far off yet.
While markets tend to value companies based on their one- or two-year forward earnings, copper miners have some underlying value based on their reserves and long-term expected copper prices. In 2016, Freeport managed to sell stakes in some copper mines at a valuation much higher than its then prevailing valuation.
Of the 23 analysts covering Freeport, two recommend “strong buy,” seven recommend “buy,” 12 recommend “hold,” and two recommend “sell.” Their mean price target of $14.23 implies a ~12% upside from the stock’s current price.