Copper Shortages Signal Bright Future For Freeport-McMoRan, Alcoa, Buenaventura: Morgan Stanley

Morgan Stanley analyst Carlos De Alba has upgraded Freeport-McMoRan Inc FCX, Alcoa Corp AA, and Compañía de Minas Buenaventura SAA BVN to Overweight, citing persistent copper supply challenges and positive developments within these companies.

Freeport-McMoRan

De Alba upgrades Freeport stock to Overweight. He expects the company to benefit from higher copper and gold prices, with a 26% upside to a $62 price target. FCX's delivery of the PT-FI smelter and the expected Grasberg mine agreement extension support this outlook. Trading at 6.8x 2025 EBITDA and 19.0x EPS, FCX is in a strong position to gain, the analyst says.

Also Read: Freeport-McMoRan Stock Dips While Market Gains: Key Facts

Alcoa

Alcoa is upgraded to Overweight due to a tighter bauxite and alumina market. The company's productivity measures aim to boost EBITDA by ~$645 million annually by 2025. Alumina prices are expected to stay high due to supply disruptions and increased demand from China, De Alba states. Alcoa's 2024-2025 EBITDA forecast is $2 billion, with a price target of $50, indicating a 30% upside.

Buenaventura

BVN is upgraded to Overweight due to operational improvements and Antofagasta's strategic investment. Gains at silver mines Uchuchacua and Yumpag, along with higher gold and silver prices, will reduce leverage concerns. The analyst’s price target is raised to $21, indicating a 20% upside.

Sector Outlook

De Alba sees good times ahead for the mining sector. This is due to decarbonization and electrification trends, geopolitical tensions, and supply chain issues.

Although the sector has underperformed compared to the S&P 500 recently, it is expected to recover. It is trading close to 1SD below its historical EV/EBITDA multiple.

Morgan Stanley's team predicts stable global GDP growth starting in Q3 2024, with faster growth in Q2 2025. This supports mining stocks.

Morgan Stanley's positive outlook on Freeport, Alcoa, and Buenaventura is due to supply constraints, strategic moves, and favorable market conditions.

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• Freeport-McMoRan Plans Production Ramp-Up: ‘It’s Just A Matter Of Time’ New CEO Says

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