Here’s another one for the sell-side scrap heap from the SMH blog:
Another analyst is turning bearish on Fortescue: Morgan Stanley has cut the iron ore miner’s shares to “underweight” with a price target to $1.65.
“Previously we applied a positive stance predicated on an expectation of rising prices and a debt re-finance,” analyst Brendan Fitzpatrick writes in a note to investors. “This thesis did not play out, and, with the new deck, we are more bearish.”
Morgan Stanley lowered the iron ore price estimate by 28 per cent for 2015 and 13 per cent for its 2016 estimate, which stripped 66 per cent and 83 per cent from our Fortescue earnings per share, the bank says.
Fitzpatrick reckons Fortescue should still achieve a very modest free cash flow margin at spot prices, “so more than ever price will determine sentiment. Our single biggest concern is that prices don’t hold at the current level.”
If FMG ever sees $4.47 again (see chart) I will run around Cloudbreak naked yelling “I’m an iron ore bear”.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
