All Eyes Are on Vale's 1Q16 after Positive Production News
What’s impacting market sentiment?
Vale (VALE) is highly leveraged compared to its peers. It also still has quite a bit of pending capital expenditure requirements due to its ongoing S11D iron ore project.
Commodity prices (COMT), on the other hand, remain depressed. This has led investors to worry about the funding gap and related issues for the company.
While the company has had a strong run this year due to firmer commodity prices, not many analysts believe that the rally is sustainable in the long run. This is one of the important factors impacting market sentiment for Vale.
For more on analysts’ views of the recent iron ore price rally, you can read Why Aren’t Analysts Sold on Iron Ore’s Recent Price Rally?
The Market has given a consensus rating of “hold” to Vale. Out of a total of 31 analysts covering the stock, 19% have given it “buy” recommendations, and 26% have given it “sell” recommendations. For Rio Tinto (RIO), 40% of analysts are recommending “buys,” while 20% are recommending “buys” for BHP Billiton (BHP) (BBL).
In comparison, Freeport-McMoRan (FCX) has “buy” recommendations from 11% of analysts covering its stock. Freeport-McMoRan forms 3.6% of the SPDR S&P Metals and Mining ETF (XME).
The average target price for Vale is $3.9 compared to its current market price of $6.1, which implies a potential downside of 54%. Scotia Capital issued Vale’s highest target price of $6, while its lowest target price came from Morgan Stanley and was $2.9.
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