I wrote elsewhere that BHP's "stock price may rise from the close of 52.50 to the range of 59.75 - 61.25". American forecasters Morningstar followed suit with their analysts making double-digit upgrades to fair value across the resources sector, forecasting that booming commodity prices will linger for years to come:
"Diversified miners Glencore, Rio Tinto, BHP and South32 saw upgrades between 11% and 23% on the back of higher price forecasts for copper, coal, aluminium and iron ore. Coal miners New Hope and Whitehaven Coal had the biggest upgrades at 33% each, with thermal coal prices set to remain at more than triple their 2020 levels over the next 18 months.
Big upgrades for almost all the miners under coverage were first mooted last month and reflect the growing view that commodities prices will remain elevated until 2024 and, in some cases, beyond, says Mathew Hodge, Morningstar director of equity research.
'Commodity prices have surged on robust economic growth and supply worries, exacerbated by the Ukraine war and Russian sanctions,' he says. 'After updating our commodity price assumptions, the fair values for most miners on our coverage list will also rise.'
Morningstar is the latest in a line of analysts to boost valuations for the mining industry as hopes fade of a speedy resolution to the shortages and disruptions driving up prices for everything from coal to nickel.
The upgrades pushed several miners back into fairly valued territory despite the broader resources sector trading at an average 21% premium to Morningstar’s fair value." - click here.
According to Morningstar, of the three major Australian iron ore miners, BHP offers the greatest upside with their "fair value" of $57.82 against yesterday's close at $52.50 (after an intra-day high of $53.72), whereas Fortescue's "fair value" was assessed at $21.73 against yesterday's close at $21.61, and Rio's at $121.66 against yesterday's close at $120.56.
