Trade of the Day: Give FCX Stock a Second Chance

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Freeport-McMoRan Inc (FCX) — I last recommended FCX stock as the Trade of the Day on May 27, suggesting readers buy it under $11.50 with a target of $12.50. The trade was unsuccessful due to falling copper and gold prices and traders taking profits following the big run up from January to late April. But FCX stock now appears to be offering us another shot at a bullish trade with a better entry point.

While S&P Capital IQ Equity Research notes shares of the miner are high risk, its analysts remain bullish. They rate FCX stock a “Buy” with a 12-month price target of $14. This target is based on 6.5 times enterprise value to 2017 estimated EBITDA, which Capital IQ notes is a discount to the peer average and warranted given the expected rebound in copper prices.

Additional positives mentioned by Capital IQ include Freeport-McMoRan’s successful sale of unprofitable mining operations, cost-cutting initiatives and the large stake in the company held by activist investor Carl Icahn. Furthermore, Freeport-McMoRan is rumored to be a possible merger candidate.

While revenues fell more than 25% in 2015, the consensus estimate is for sales growth of 2.6% in 2016 to $16.3 billion. Earnings are projected to swing to a profit of 53 cents per share this year from a loss of 8 cents last year, and then nearly double to $1.03 per share in 2017.

Turning to the chart, we see that since hitting a high above $14 in late April, FCX stock has traded in a consolidation band from about $10 to $12. Accumulation has come on high volume and selling on lower volume.

The recent sell signal from the MACD indicator is a minor one and may result in the opportunity to buy FCX stock under $10 with a trading target of $12 for a potential return of 20%.

FCX Stock Chart
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Chart Key


Article printed from InvestorPlace Media, https://investorplace.com/2016/06/freeport-mcmoran-inc-fcx-stock-trade-day-2-2/.

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