2023-06-06 11:27:08 ET
Vale ( NYSE: VALE ) +1.8% in Tuesday's trading as RBC Capital upgraded the stock to Outperform from Sector Perform with a $15 price target, raised from $13, saying it is poised to participate in a probable iron ore sector bounce on China stimulus expectations.
Although Vale's ( VALE ) earnings could drop further if the iron ore producer is unable to restore volumes to capacity levels due to weak demand, especially in the short term, higher iron ore prices and positive expectations on stimulus should allow for shares to bounce, RBC's Tyler Broda said.
As steelmakers continue to accelerate their decarbonization plans, Vale's ( VALE ) pellet, DRI and high grade inputs likely will hold pricing better than lower quality production at peers, Broda said.
In a sector with limited catalysts, Vale's ( VALE ) expected sale of a 10% stake in its base metals business provides interesting differentiation, Broda said, adding a sale followed up by a potential IPO for the nickel and copper business, with turnaround potential and an attractive organic project base, should become a bigger part of the Vale story.
More on Vale:
- Financial and valuation comparison to sector peers
- Analysis: Vale: Separating The Base Metals Business Could Unlock Value
- Stock price return: Down 15.5% YTD, down 25.5% in the past 12 months
For further details see:
Vale upgraded at RBC on anticipated iron ore sector bounce