FMG share price: where next as iron ore prices remain elevated?

Credit Suisse yesterday significantly raised their 12-month price target on Fortescue Metals Group.

Fortescue Metals Group (ASX: FMG) has proven to be one of the best performing stocks on the ASX 200 in the last year – rising ~160% in that period.

In the shorter term, the stock has also continued to outperform: over the last five trading sessions FMG has risen ~13% (even when including a healthy pull-back today which saw the stock give up some of these gains, dropping 1.5%).

At the close of Thursday’s session, the FMG share price stood at $12.48.

Yet for all that momentum, in our most recent piece covering the stock – we noted that:

‘Fortescue (ASX: FMG) currently has a 12-month average price target of $8.85 – split between nine HOLD ratings and nine SELL ratings, according to Bloomberg Data.’

Do you own FMG shares? You can hedge your downside risk by trading CFDs now.

FMG share price: an evolving landscape

The picture for Fortescue looks to be changing somewhat – as the dynamics of the iron ore market shift, with some expecting Chinese steel demand to come in stronger than previously thought.

Indeed, as a possible sign of changing sentiments, Credit Suisse yesterday upgraded their rating on Fortescue from 'underperform' to 'neutral'. In step with that, the investment bank also upgraded their 12-month share price target on the stock – from $7.50 per share to $11.00 per share.

Interestingly, though the investment bank had previously forecast a ~3% decline in Chinese steel demand in CY20 – Credit Suisse now expects Chinese steel demand to actually increase 1.6% in 2020.

'We consequently bump up our in house iron ore prices (to US$90/t in CY20 from US$80 and to US$80/t from US$65/t in CY21.)’

Moreover and looking at the catalysts behind FMG’s recent share price run-up, the investment bank posited that the company’s:

'Share price continues to reap the rewards of higher iron ore prices, strong but slightly softer price realisations, best-in-class operational performance and a balance sheet that is now in a position to withstand any reasonable bear case scenario.'

Ultimately, with the potential prospect of iron ore prices remaining higher for longer, Credit Suisse have also upgraded their earnings forecasts for FMG. Here the metals & mining company is expected to report earnings per share (EPS) figures of: US$1.44 in FY20, US$1.07 in FY21 and US$0.74 in FY22.

As has always been the case for Fortescue Metals Group – given its status as a pure-play iron ore miner – weakness in the price of iron ore remains the key risk that investors should be aware of.

FMG is set to release its December Quarterly Production Report on January 30.

Ready to start hedging? Open an account with IG today to get started.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

Please see important Research Disclaimer.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access

Live prices on most popular markets

  • Forex
  • Shares
  • Indices
liveprices.javascriptrequired
liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

liveprices.javascriptrequired

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Monday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.