BofA lifts Vale stock rating to Buy, price target to $11.50

On Thursday, BofA Securities analysts upgraded shares of Vale S.A. (NYSE: VALE), a leading mining company, from Neutral to Buy, setting a new price target of $11.50, up from the previous $11.00. The upgrade comes as a response to the recent decline in the company's stock value following the imposition of tariffs. Currently trading near its 52-week low of $8.05, InvestingPro analysis suggests the stock is undervalued, supporting BofA Securities' view of attractive valuation.

Vale's shares have faced downward pressure, but the analysts at BofA Securities believe that the company's current discounted valuation, along with its improved fundamental narrative, provides a sufficient safety margin. With a P/E ratio of 7.01 and an impressive dividend yield of 8.47%, the stock shows compelling value metrics. This reassessment is in light of a more cautious outlook on iron ore prices, which are a significant factor in Vale's business. InvestingPro data reveals the company maintains a "GOOD" overall financial health score of 2.79, suggesting robust fundamentals despite market challenges.

According to BofA Securities, Vale is now trading at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 4.2, though InvestingPro data shows a current EV/EBITDA of 3.8, indicating even more attractive valuation metrics. They also forecast the company to generate a free cash flow to equity (FCFE) yield of 8.5% in 2025, excluding expenses related to the Mariana and Brumadinho incidents. The analysts find these figures compelling, especially given their projection of iron ore prices at $96 per ton. For deeper insights into Vale's valuation and 8 additional ProTips, subscribers can access the comprehensive Pro Research Report.

The revised price objective suggested by BofA Securities is based on the current exchange rate, translating to $11.50 per American Depositary Receipt (ADR) or 71 Brazilian reais per share, an increase from the previous target of $11.00 per ADR or 68 reais per share. This new target reflects the analysts' confidence in Vale's investment potential despite the recent market challenges. The company's analyst consensus shows even more upside potential, with targets ranging from $10.00 to $16.50 per share.

In other recent news, Vale has entered into a joint venture with Global Infrastructure Partners (GIP) in Aliança Energia. This partnership comes as Vale is in advanced talks to sell a majority stake in its renewable energy subsidiary and a solar plant to GIP. Vale is considering selling a 70% stake in both Aliança Energia and the solar plant, with potential payment estimates ranging from 5-6 billion reais ($870 million to $1.04 billion). The move is viewed strategically by RBC, as it could decrease Vale's net debt by 7% while maintaining competitive energy costs. Although other companies showed interest, Vale has decided to negotiate exclusively with GIP. No final contract has been signed yet, as Vale is still exploring potential partnerships for Aliança. The balance sheet value of Vale's stake in Aliança was noted to be $700 million at the end of 2024. Conversations between Vale and GIP are reportedly progressing, although GIP has not commented on the ongoing discussions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.