Nearly a decade ago, Intrepid Potash, Inc. (NYSE: IPI) traded close to $70. Steady corrosion has brought it to $4.
Although not expected to scale its peaks any time soon, Intrepid may now boast marginal upside.
Stephens analyst Mark Connelly upgraded Intrepid to Overweight with a $5 price target.
Stephens considers Intrepid one of few small-cap ways to capitalize on rising potash prices. Demand has steadily increased in the last two seasons allowing $30- and $20-per-ton price hikes, and the firm boasts “solid operating leverage that makes price movement in potash meaningful.”
Notably, though, Intrepid’s stalling of traditional potash mining coupled with new byproduct reporting has limited earnings visibility and inventory expectations.
“If Intrepid can sell byproducts that were previously left behind as waste, we think investors should be okay with the reduced transparency,” Connelly wrote in a note.
At the same time, previous pricing risk from bloated Trio inventory is seen to have abated, and Intrepid appears well positioned to see high-margin cash generation from rising water demand. Connelly notes, however, that the latter trend’s duration and steadiness are yet unseen.
“While there is still room for quite a lot of surprises quarter to quarter, an improving grain price outlook, a better inventory situation and solid water and byproduct results suggest that free cash should continue to improve,” the analyst wrote.
At time of publication, shares were trading down 1.7 percent at $3.98 after hitting an intra-day high of $4.20.
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Latest Ratings for IPI
|May 2018||Stephens & Co.||Upgrades||Equal-Weight||Overweight|
|Mar 2018||Cowen & Co.||Upgrades||Underperform||Market Perform|
|Dec 2017||Stephens & Co.||Initiates Coverage On||Equal-Weight|
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