UBS downgrades to Neutral from Buy, reducing the target to $18 from $25. Fortescue Metals has generated a total shareholder return of 213% over 12 months on the back of the strong iron ore price.
Yet the broker believes the iron ore price risk is building as Brazilian supply recovers and Chinese demand slows. Hence, UBS considers the risk/reward is no longer compelling despite the high cash returns.
Target price is $18.00.Current Price is $19.99. Difference: ($1.99) – (brackets indicate current price is over target). If FMG meets the UBS target it will return approximately -11% (excluding dividends, fees and charges – negative figures indicate an expected loss).