Raymond James cuts Methanex stock price target to $40

On Tuesday, Raymond (NSE:RYMD) James made a significant adjustment to Methanex (TSX:MX) Corporation’s (NASDAQ:MEOH) stock, reducing the price target from $62.00 to $40.00. Despite the cut, the firm maintained an Outperform rating on the chemical manufacturer’s shares. According to InvestingPro data, the stock is currently trading significantly below analyst targets ranging from $36 to $65, with a price-to-book ratio of 0.88. The revision comes amid a backdrop of a weaker macroeconomic environment, including heightened trade tensions and lower energy prices, which have led to a decline in global methanol prices following a seasonally strong winter period.

Methanol prices have seen a considerable drop, falling around 22% year-to-date, as production that was idled during the winter, particularly in Iran, has recommenced. Additionally, growing concerns about the global economy have contributed to the downward pressure on prices. Methanex’s stock has experienced a stark decline, losing nearly 45% of its value year-to-date, a much steeper fall compared to the Toronto Stock Exchange’s (TSX) 3.5% decrease over the same period. InvestingPro analysis indicates the stock is currently in oversold territory, with a strong free cash flow yield of 31% and a healthy current ratio of 2.62.

The sharp decline in Methanex’s share price is thought to be a reaction to multiple factors, including the market’s anticipation of potential challenges related to the company’s leverage following the closing of its acquisition of OCI N.V.’s methanol and ammonia assets. While the timing of the deal has been seen as less than ideal, Raymond James analysts believe that the leverage situation is manageable. However, they suggest that the circumstances raise questions about whether Methanex’s management should consider renegotiating the terms of the acquisition or possibly walking away from the deal, despite the implications of a break-fee.

Despite the lowered price target and the challenges faced, Raymond James highlighted that Methanex’s stock has reached key value thresholds that historically have been considered very attractive entry points for long-term investors. The firm reiterated its Outperform rating, signaling confidence in the stock’s potential for future growth. InvestingPro analysis reveals the company has maintained dividend payments for 24 consecutive years, demonstrating strong financial stability. For deeper insights into Methanex’s valuation and growth potential, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, along with 12 additional ProTips and extensive financial metrics.

In other recent news, Methanex Corporation has seen various updates from analysts regarding its financial outlook and strategic initiatives. RBC Capital Markets maintained a Sector Perform rating for Methanex, citing economic uncertainties and the pending acquisition of OCI’s methanol and ammonia assets as key factors influencing their decision. Jefferies revised their price target for Methanex to $64.00 from $68.00 while maintaining a Buy rating, due to an unexpected outage at the company’s G3 facility which could affect the 2025 volume outlook. UBS increased Methanex’s price target to $66.00 from $53.00, keeping a Buy rating, noting the company’s strategic positioning in the methanol market despite potential price declines. BMO Capital Markets also raised Methanex’s price target to $65.00, maintaining an Outperform rating, and highlighted the positive impact of the OCI asset acquisition on Methanex’s financials. Analysts from BMO noted that Methanex’s free cash flow could reach approximately $10 per share post-acquisition, assuming methanol prices stabilize. These developments reflect a mix of cautious optimism and strategic positioning for Methanex as it navigates the current economic and operational landscape.

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