Goldman Sachs’ Latest Ratings on Rio Tinto and Fortescue
Financial giant Goldman Sachs has provided fresh insight into two prominent ASX 200 mining companies. Their analysis suggests substantial valuation disparities and future potential, leading to divergent recommendations: to purchase shares of Rio Tinto Ltd and to part with holdings in Fortescue Ltd.
Rio Tinto: A Valuation Opportunity
Rio Tinto’s shares have been rated a ‘buy’ by Goldman Sachs, with a 12-month target of $138.90, indicating a 6.7% potential upside from its current price of $130.18. This recommendation is bolstered by not only Rio Tinto’s free cash flow and dividend yield but also its competitive advantage in production growth and low-emission aluminum business.
- 12-month price increase: 16.3%
- Recent quarter-over-quarter production saw decreases across several commodities
- Attractive cash flow and projected growth in copper, iron ore, and aluminum production in 2024 and 2025
Fortescue: Concerns Prompt a Sell Rating
In contrast, Goldman Sachs has issued a sell rating on Fortescue, with a 12-month price target reflecting a 33.5% potential decrease from the current $25.43 share price. Their stance is influenced by several factors, including valuation, anticipated iron ore grade realisations, and risks associated with specific mining projects and the company’s energy strategy.
- 12-month price increase: 23.1%
- Recent shipment decreases due to operational challenges
- Concerns about capital allocation, project execution, and dividend sustainability
While these ratings may impact investor decisions, it’s important to note the associated risks and rewards when considering stock portfolios.