U.S. stocks edge higher; solid earnings season continues
On Wednesday, JPMorgan revised the outlook for Pilbara Minerals Ltd (ASX:PLS:AU), upgrading the company's stock rating from Neutral to Overweight. The new price target set by the analyst is AUD2.55, adjusted from the previous AUD3.00.
JPMorgan's decision to upgrade the stock rating follows a comprehensive review of market prices for the December quarter and updated commodity price forecasts. Despite a reduction in copper (Cu) and aluminum (Al) prices by 10% and 5% respectively for 2025, based on the fall in forward curves, the analyst noted an increase in alumina prices by 12% since the last revision. Meanwhile, forward curves for metallurgical and thermal coal have slumped, leading to a 13% and 23% reduction in the 2025 forecasts for these commodities. Iron ore prices remain largely unchanged.
The analyst also highlighted a 3% rise in gold prices, while steel prices have seen a decrease of 3-8%. However, lithium and rare earth prices have been maintained at their current levels. Additionally, the forecast for the Australian dollar has been adjusted, showing a 9% decline to 62 cents, which is expected to mitigate the impact on miners' earnings.
Taking into account the revised commodity prices and currency forecasts, JPMorgan anticipates a significant increase in Pilbara Minerals' earnings. The firm's estimates for the company's financial years 2025 and 2026 have been adjusted upwards by 53% and 104% respectively, from a low base. This positive earnings revision has been a key factor in the decision to upgrade Pilbara Minerals' stock rating to Overweight.
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