Freeport McMoRan, Southern Copper Stocks Slip As Analyst Hints At End Of Bull Run

Shares of copper miners Freeport-McMoRan (FCX) and Southern Copper (SCCO) scaled back on Tuesday after Morgan Stanley downgraded both stocks following their recent outperformance.

Freeport, the top U.S. copper miner, fell 3% as the brokerage cut its rating on the stock to ‘Equal Weight’ from ‘Overweight’ before raising the price target for the stock to $54 from $45. The new price target still implied an upside of 26.3% compared with the stock’s previous close.

Shares of Freeport have still gained over 33% over the last three months, tracking a rally in copper prices. U.S. President Donald Trump has proposed a 50% tariff on imported copper, which is expected to take effect on Aug. 1.

The tariffs sent shockwaves through the industry as the U.S. imports nearly half the copper it consumes, most of it from Chile, according to the U.S. Geological Survey. Domestically, the U.S. has only three operational copper smelters.

The brokerage also downgraded Southern Copper to ‘Underweight’ from ‘Equal Weight.’ The stock fell 2.4% on Tuesday.

However, Morgan Stanley analysts attributed the downgrade to concerns about demand and valuations. Freeport’s price-to-earnings ratio, a metric used by Wall Street to gauge valuation, stood at 19, compared with gold Miner Newmont’s 13. Southern Copper’s PE ratio has jumped to 22, as per Fiscal.ai data.

Retail sentiment on Stocktwits about both Freeport and Southern Copper stocks was in the ‘bullish’ territory.

Global copper mine production is expected to rise by an average annual rate of 2.9% over the next decade, according to Fitch, as several projects are expected to come online amid growing demand for the metal used in electric vehicles, power infrastructure, and various other industries.

However, a recent spike in trade tensions between the U.S. and its key trading partners poses risks to the global economy.

Freeport stock has risen 16% this year, while Southern Copper is up 7.7%.

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