Analysts recently weighed in on Freeport-McMoRan Inc (NYSE:FCX) and Micron Technology, Inc. (NASDAQ:MU), following an asset sale and analyst day, respectively. While one analyst remains bullish on Freeport, citing debt reduction goals as a result of a mine sale, the other is neutral on Micron, citing demand difficulties though on track objectives.
Yesterday, analyst Alexander Burnes of Nomura Holdings weighed in on FXC following the sale of a 13% stake in its Morenci copper mine to Sumitomo Metal Mining Co. The company plans to use the $1 billion in cash it receives towards its $5-10 billion debt, previously exploring asset sales “to improve liquidity and reduce debt.” The company will gain around $550 million on the transaction after taxes and“expects to utilize previous losses to offset cash taxes on the transaction.” According to a recent report by the analyst, the sale of its small stake in the Morenci mine was “one of the most logical and probably outcomes.” He believes the company is making the right move with this sale, explaining, “We view the transaction positively, as not only does it advance FCX’s debt reduction goals, but we also see the valuation as in-line relative to our model.”
According to Burns, the sale valued Morenci at around $7.7 billion, which is in line with his estimates. Burns believes the sale was of “encouraging” fair value, stating, “the transaction doesn’t seem to embed any sort of discount related to current market distress.” He states many advantages of the company’s high stake in Morenci, classifying the mine as a “long-life, low cost US operation that recently finished a 225 mm lbs pa expansion project.” Despite FCX using the proceeds of the sale to repay its bank term loan and revolving credit facility, “liquidity still remains tight” and the analyst believes continued asset sales may be necessary to manage its debt.
On February 16, 2016, Burnes reiterated a Buy rating on the company with a $7.00 price target. The analyst expects the sale to reduce the company’s 2016E net debt from around $20 billion to around $19 billion, contributing to its leverage reduction.
Alexander Burnes has a 50% success rate recommending stocks with an average loss of (16.5%) per recommendation on TipRanks.
According to TipRanks’ statistics, out of the 7 analysts who have rated the company in the past 3 months, 2 are bullish while 5 remain on the sidelines. The average 12-month price target for the stock is $6.21, marking a 15% downside from where shares last closed.
Micron Technology, Inc
Analyst Betsy Van Hees of Wedbush weighed in on Micron after the company hosted its Winter Analyst Day last Friday in Scottsdale, AZ. The analyst expresses concern regarding the company’s supply and demand figures, although she believes the company is “on track to meet its operating priorities in FY:16.” On February 15, 2016, Van Hees reiterated a Neutral rating on shares and reduced her price target to $11.50 from $15. She explains, “We believe there continues to be very little visibility on 2H demand trends and if MU’s cost downs will be able to outpace ASP declines driving the “relative GM expansion” MU expects beginning in 2H FY:16. While shares of MU are down about -69% from its 52-wk. high vs. the -19% of the SOX over the same time period, and have likely washed out here, we are looking for DRAM ASPs to hit bottom and signs of an inflection point in end-market demand to get upbeat on the story again. Our 12-month PT of $11.50 is based upon about 7x our CY:17 estimate of $1.65.”
Betsy Van Hees has a 46% success rate recommending stocks with an average return of 10.8% per rating on TipRanks.
According to TipRanks’ statistics, out of the 21 analysts who have rated the company in the past 3 months, 17 gave a Buy rating while 4 remain on the sidelines. The average 12-month price target for the stock is $17.95, marking a 58% increase from where shares last closed.