UBS Upgrades Freeport-McMoRan On Sell-Off, Projects Rising Copper Prices

Freeport-McMoRan Inc FCX seems poised to outperform peers in the back half of the year, given its disproportionally high gold exposure and production growth rate, according to UBS.

The Analyst

Andreas Bokkenheuser upgraded Freeport-McMoRan from Neutral to Buy and reduced the price target from $13 to $12.

The Thesis

The market seems to be overly concerned about lower copper prices in the near term, overlooking Freeport-McMoRan’s growth trajectory, Bokkenheuser said in the Thursday upgrade note. (See his track record here.)

Copper price estimates for the year have been revised down due to the trade war and slowdown in China, triggering the price target reduction, the analyst said.

The pressure on the company’s stock appears overdone, he said.

Copper prices should rise between 2020 and 2022, and Freeport-McMoRan has very high exposure to this trend, Bokkenheuser said.

Freeport-McMoRan struck first ore at its Grasberg mine in the second quarter, which should help the company achieve 10% annual production growth into 2023, the analyst said.

"With 2Q underground output higher than expected and investors still cautious on the ramp-up, we assess production risk is to the upside."

UBS named Freeport-McMoRan as its "top Americas copper pick."