Market watchers might be considering investing in Fortescue Metals Group Ltd (ASX: FMG) after the recent tumble in its share price. The stock has dropped more than 10% from its year-to-date high, reached in February.
Right now, the Fortescue share price is $20.96. Does that make the S&P/ASX 200 Index (ASX: XJO) iron ore giant a buy? Letâs take a look.
Are Fortescue shares a buy at their current price?
Expert opinions on the stockâs future are mixed. Thatâs probably at least partly due to expectations for the price of iron ore, which currently sits at around US$132 a tonne. The companyâs profits are closely tied to the commodityâs value.
CommSec, for one, is slightly bearish on iron ore after its recent rally. It tips the commodity’s value to fall to US$100 a tonne this year, my Fool colleague Bronwyn reported last month.
Meanwhile, Goldman Sachs expects the iron ore price to reach US$150 a tonne in coming months before falling to US$120 a tonne for 2023. However, that bullish forecast isn’t reflected in the broker’s outlook for Fortescue.
It predicts the iron ore giantâs stock will tumble 27% to $15.50, alongside its dividends.
It believes Fortescueâs valuation is higher than those of ASX 200 peers BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO). Itâs also wary of the companyâs green energy leg Fortescue Future Industries and its multi-billion-dollar Pilbara decarbonisation strategy.
But not all are so sceptical. Fairmont Equitiesâ Micheal Gable labels the stock a hold, saying as per The Bull:
Recently, [Fortescue] enjoyed solid buying support and we believe the technical chart continues to look bullish.
I also think it’s worth considering Fortescue’s green energy ambitions. The company is aiming to be a leader in the hydrogen and battery space, as my colleague Tristan recently outlined. No doubt the green energy sector houses mountains of potential.
However, in my opinion, the current Fortescue share price doesn’t represent good value.
The post Is the Fortescue share price a buy at $21? appeared first on The Motley Fool Australia.
Should you invest $1,000 in Fortescue Metals Group Limited right now?
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More reading
- How to generate $10,000 of passive income from Fortescue shares
- Is it time to buy ASX 200 iron ore shares right now?
- Fortescue share price marching higher as green hydrogen plans heat up
- Are Fortescue shares back on the menu amid job cuts?
- Could buying Fortescue shares at under $22 make me rich?
Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.
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