2023-04-17 15:57:29 ET
Vale ( NYSE: VALE ) -1.7% in Monday's trading as Citigroup cut the stock to Neutral from Buy with a $16 price target, saying iron ore about to enter a period of seasonal weakness driven by the China steel mill stocking cycle.
Vale's stock price remains strongly correlated with iron ore, and Chinese steel demand appears weak, and iron ore peaked in April-May and troughed at ~$80/ton in October-November in both 2021 and 2022, Citi's Alexander Hacking noted.
Vale's ( VALE ) free cash flow yield remains relatively attractive at 8% on Citi estimates, and the firm does not see a base metals separation or stake sale as a positive catalyst.
Longer-term, Hacking said he remains positive based on Vale's ( VALE ) strong asset quality and the potential to improve operating performance.
Despite rising debt, Vale ( VALE ) "will still be able to generate a decent dividend yield that may appeal to investors," Ellsworth Research writes in analysis published recently on Seeking Alpha .
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Vale downgraded to Neutral from Buy at Citi on iron ore seasonality