Freeport-McMoRan In (NYSE:FCX) ended the third consecutive positive day with a gain of 3.94% and the volume supported it with a surge to 32 million against the daily average of 20 million. The stock is enjoying the benefit of being upgraded by both Morgan Stanley and Deutsche Bank in quick succession.
Morgan Stanley doesn’t think that Freeport-McMoRan In (NYSE:FCX) will burn cash in 2016-17 though 2015 must be considered as the only bridge year when the company may still burn cash, even if copper prices collapse to near marginal cost. Morgan Stanley upgrades the stock to “Overweight”.
On the other hand, Deutsche Bank reiterates $26 as the 12 month target for Freeport-McMoRan In (NYSE:FCX) and rates it as “buy”. The first quarter result released by the company forced the bank to revise the oil and gas guidance 3 million barrels of oil equivalent (boe) lower but the 2017 oil and gas guidance has been raised to 63 million boe from the earlier 57 million boe. Against the earlier estimate of $18 per boe, the bank estimates higher oil and gas cost of $19 per boe in 2016 and lower copper costs for the company.
The oil and gas assets acquired from McMoRan Exploration Co and Plains Exploration & Production Co. by Freeport in 2013 for $9 billion will now be divested and most probably, publicly listed by the end of 2015. This divestment is just one of the steps taken by the company to reduce its net debt to $12 billion by 2016 from the current level of $20.3 billion.
These steps have introduced some bulls to the stock and a bit f bounce is visible too but how long that will sustain still remains questionable. The stock is hitting a short term channel resistance right now and above that, strong supply waits in the area of $24-$27.