Could this spell the end for the iron ore miner’s strong share price rise?
The post Fortescue (ASX:FMG) share price rises higher amid political landscape appeared first on The Motley Fool Australia. –
The Fortescue Metals Group Limited (ASX: FMG) share price has been a solid performer over the last 12 months. This comes after the iron ore miner achieved record year-to-date shipments coupled with the surging iron ore price.
However, the federal government’s political tensions with China have put Australia’s most precious commodity in the spotlight.
Below, we take a look into the issue facing Fortescue today.
What challenge is Fortescue facing?
Fortescue shares have been dipping lower in recent times amid the backdrop of the ongoing feud between Australia and China.
China has taken punitive economic measures against Australia for calling an inquiry into the origin of COVID-19. As such, China imposed tariffs or restrictions on Australian coal, barley, wine, red meat, cotton, timber, and even lobsters.
Just recently though, China has turned its attention to reducing its reliance on Australian iron ore. Last year, the Asian giant bought around 70% of the steel making ingredient from us, worth more than $90 billion.
But now, China is focused on promoting domestic production, as well as exploiting untapped deposits in Africa. Fortunately for Australia and its leading iron ore miners, it’s easier said than done. Based on the sheer scale of Chinese demand, this would take at least a number of years.
Despite the drop in Fortescue shares, the spot price of iron ore has skyrocketed to US$206.29 a tonne.
What do the Brokers think?
At the end of April, a number of brokers rated the company with varying price points. Investment firm Morgans cut its price target for Fortescue by 1.4% to $20.90. Citi followed suit to also reduce their rating by 3.8% to $21.80. The most recent broker note came from Goldman Sachs last week, which has initiated a price of $18.20 for the mining outfit.
At the time of writing, the Fortescue share price is sitting at $23.41, up 1.92%. Based on the above broker notes, the miner’s shares are somewhat higher than what analysts are currently valuing the company.
Fortescue share price snapshot
The Fortescue share price has gone from strength to strength over the past 5 years, rising more than 600%. The company’s share price reached an all-time high of $26.40 at the beginning of January.
On valuation grounds, Fortescue commands a market capitalisation of roughly $70 billion, with approximately 3 billion shares on issue.
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Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.