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Freeport-McMoRan Stock Ignores Trade Pessimism

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Jun. 11 2019, Published 11:14 a.m. ET

Freeport-McMoRan

Freeport-McMoRan (FCX), the leading US-based copper miner, has risen 1.6% as of 11:45 AM EST on June 11. The stock lost 21% last month amid the broader market sell-off. Metals and mining stocks came under pressure last month amid the escalating US-China trade war. Several metal and mining stocks made fresh 52-week lows last month. However, Freeport-McMoRan has bounced back this month. The stock has risen more than 12%.

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Trade pessimism

The correction represented a good entry point in the stock. Read Is Freeport-McMoRan a “Buy” After Falling in May? to learn more. Despite the short-term noise about the trade war, Freeport-McMoRan’s long-term fundamentals look promising. While bears might draw comparisons with the 2015–2016 sell-off, Freeport-McMoRan is a different company now. Freeport-McMoRan has exited its energy assets. The company has brought down its debt to manageable levels. The Indonesia issue is also largely settled apart from the environmental issues raised by the government.

So far, 2019 and 2020 look challenging for Freeport-McMoRan due to the transition at its Grasberg mine. However, after the mine scales up underground operations, we should see a structural improvement in Freeport-McMoRan’s earnings. A long-term approach might be needed to evaluate the company. Read Freeport-McMoRan: Should You Think Like Warren Buffett to learn more.

Analysts’ recommendations

Freeport-McMoRan has received a mean consensus target price of $14.5, which represents a potential upside of more than 32%. For Freeport-McMoRan stock, seven analysts recommended a “buy” or higher rating, 12 recommended a “hold,” and two recommended a “sell.”

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