Potash Corp. Shares Downgraded To Sell Amid 'Rally On Shaky Ground'

Paradigm Capital has downgraded shares of Potash Corporation of Saskatchewan (USA) POT to Sell from Hold, as prices remain depressed, oversupply remains a concern, farmer sentiment is low and there has not been a rally in grain prices.

Potash shares are up 18 percent in the past month on a broader market rally and improved market sentiment to commodity‐related stocks. But, analyst Spencer Churchill said the rally is on a shaky ground as "the fundamental backdrop has not improved and [he believes] could remain challenged through the year barring a material recovery in grain prices."

Related Link: Potash Oversupply Makes Investments Uncertain In Short Term, Morgan Stanley Says

Churchill, who has a price target of $13.50 on Potash Corporation, noted that potash prices remain depressed in an oversupplied market, and he does not foresee a material rebound even following completed contract negotiations and volume upticks.

"Gauges of farmer spending and confidence are at, or near, all‐time lows, and U.S. farm net income is expected to drop another 3 percent in 2016. Hence, Potash's view of flat global potash shipments in 2016 could be too optimistic if farmers choose to cut back on new purchases and 'mine' the soil this year," the analyst said.

Shares of Potash Corporation closed Monday's regular trading at $18.95, and the stock has gained 9 percent this year.

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