UPDATE: Goldman Sachs Downgrades Freeport-McMoRan to Neutral
Goldman Sachs has published a research report on Freeport-McMoRan (NYSE: FCX) and has downgraded the company from Conviction List Buy to Neutral with a lowered price target, from $46 to $38.
In the report, Goldman Sachs wrote, "FCX today announced its intention to make a full foray into the energy sector by buying PXP for $6.9bn cash and stock (39% premium) and MMR for $2.4bn net of 36% stake in MMR currently owned by FCX and PXP (74% premium) with a total transaction value of around $19.6bn including assumption of debt. We believe that FCX stock will remain in the penalty box for the foreseeable future and multiples will remain depressed on the back of these acquisition announcements, given investor uncertainty on the strategic merit and returns potential from FCX's expanded diversification into the energy sector. We are lowering our target P/E multiple by 14% to 9.0X and EV/EBITDA multiple by 18% to 4.5X. FCX has been considered by investors as a favorite copper name but this proposed diversification into energy (estimated to be about 25% of 2013 EBITDA) reduces its attractiveness as a pure copper play, in our view, which could result in rotation out of FCX to relatively higher copper leveraged names."
Freeport McMoRan closed Wednesday at $32.16.
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