Copper Stock Picks Up Bear Notes After Earnings

FCX is on track for its worst week since early August

by Patrick Martin

Published on Jan 24, 2020 at 10:55 AM

The shares of Freeport-McMoRan Inc (NYSE:FCX) are down 2.2% to trade at $11.71 this morning after receiving two price-target cuts. J.P. Morgan Securities and Deutsche Bank trimmed their targets to $14 and $13.50, respectively, in response to the copper miner forecasting higher costs in 2020. 

Yesterday, FCX gapped lower by 2.8% in the wake of its quarterly report, which in addition to the higher costs, reported lower current-quarter mining output. The shares are now pacing for their worst week since Aug. 2, and Wednesday breached long-term support at their 50-day moving average. 

The recent bear notes could be a sign of things to come. Of the 14 brokerages covering FCX, nine rate it a "strong buy," with zero "sells" on the books. Plus, the consensus 12-month price target of $14.44 is a 22.5% premium from its current perch. 

In the options pits, traders are focusing on puts. The equity's Schaeffer's put/call open interest ratio (SOIR) of 1.37 sits two percentage points from an annual high. This means short-term speculators are more put-heavy than usual.

It's an attractive time to purchase premium on short-term FCX options. The stock's Schaeffer's Volatility Index (SVI) of 37% registers in the 19th annual percentile. In other words, near-term FCX options have priced in lower volatility expectations just 19% of the time over the past year.


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