Why did Macquarie just upgrade its target for Whitehaven shares by 9%?

The Whitehaven Coal Ltd (ASX: WHC) share price is coming out relatively unscathed today.

This comes as Wall Street recorded heavy losses overnight as it suffered its worst day since June 2020.

The Dow Jones tanked 3.94% along with the tech-heavy Nasdaq down 5.54% and the S&P 500 lost 4.32%.

The market moves followed the release of the hotly anticipated consumer price index report for August.

The data showed inflation rose by 0.1% on a monthly basis.

Consequently, this has impacted the Aussie stock market in which the S&P/ASX 200 Index (ASX: XJO) is tumbling by 2.61%.

On the other hand, Whitehaven shares are down marginally by 0.12% to $8.45 following Macquarie’s latest positive assessment.

Let’s take a look at what the broker updated the market with.

Macquarie remains bullish on Whitehaven

Despite short-term fluctuations in the price of coal since June, the team at Macquarie believe the mid-term outlook is rosy.

As reported by The Australian, the broker is forecasting prices for coking (metallurgical) coal to accelerate in the next year.

This is being backed by the understanding that there is a “supply underinvestment” in the market along with India’s strong demand for coal imports.

The country is becoming heavily reliant on coking coal as it seeks to double its steel production to 300 mt (million tonne) annually by 2030.

Macquarie slashed its fourth-quarter 2022 projections by 10% to US$310 per tonne due to the current crisis in China.

The Asian superpower is trying to come to grips with a slowing economy and deteriorating property market.

In turn, this is impacting steel demand for the time being.

However, even with the current climate, the broker anticipates a sharp recovery in the following year.

For FY23, Macquarie lifted its price forecast by 17% to US$350 per tonne for coking coal.

In addition, it also raised Whitehaven’s price target by 9% to $10 per share.

Based on the current price, this implies an upside of almost 20% for investors.

Whitehaven share price summary

Since the start of 2022, Whitehaven shares have rocketed 220% on the back of favourable coal prices.

In comparison, the S&P/ASX 200 Energy Index (ASX: XEJ) is up 34% over the same time period.

Whitehaven shares reached an all-time high of $8.84 earlier this week before retreating both yesterday and today.

Whitehaven presides a market capitalisation of approximately $8.09 billion.

The post Why did Macquarie just upgrade its target for Whitehaven shares by 9%? appeared first on The Motley Fool Australia.

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More reading

• Why Grange, Link, Ramsay, and Whitehaven Coal shares are dropping
• Why is the Whitehaven share price lagging behind the ASX 200 on Tuesday?
• Why is the Whitehaven share price lagging the ASX 200 on Monday?
• Here’s why ASX 200 energy shares are diving lower today
• Why Karoon Energy, Pilbara Minerals, PointsBet, and Whitehaven Coal are rising

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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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