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Much to the probable relief of ASX investors, the S&P/ASX 200 Index (ASX: XJO) is enjoying a day of healthy gains so far this Tuesday. At the time of writing, the ASX 200 is up a robust 0.63% at 7,290 points. But one ASX 200 share is making those gains look paltry. That would be the Webjet Limited (ASX: WEB) share price.

Webjet shares are putting the ASX 200 to shame today. This company is up a healthy 4.14% at $5.54 a share so far after closing at $5.33 yesterday and opening at $5.50 this morning.

So what could be behind this market-beating performance?

Why is the Webjet share price taking off today?

Well, to put things into perspective, these gains come after a very rough time for the Webjet share price during November. This is a company that was going for $6.60 a share around a month ago, meaning it has fallen more than 16% since then. And that’s including today’s gains.

We can probably blame the emergence of the Omicron COVID variant last month for most of Webjet’s woes. Most ASX shares in the travel sector got smashed over November, probably on similar concerns. For example, on today’s pricing, Qantas Airways Limited (ASX: QAN) shares are still down more than 11.5% over the past month. Corporate Travel Management Ltd (ASX: CTD) shares have lost close to 7.5%. And Flight Centre Travel Group Ltd (ASX: FLT) shares are down close to 15%.

So it’s likely not an individual problem with Webjet that has tanked the shares over the past month, but a sector-wide selloff.

As for today’s gains, we can point to a converse pattern. All of the companies listed above are enjoying strong gains today. Corporate Travel and Flight Centre, in particular, are both up more than 5% so far.

This comes after travel-related shares over in the US rallied strongly last night (our time). Delta Air Lines Inc (NYSE: DAL) rose close to 6% in last night’s trading. American Airlines Group Inc (NASDAQ: AAL) rose almost 8%. And Carnival Corp (NYSE: CCL) shares were up a pleasing 8.14%. It’s possible that the ASX travel sector has taken its cues from these US companies today.

Evidently, both ASX and US investors seem to be putting their Omicron worries behind them, at least for now.

At the current Webjet share price, this ASX 200 travel share has a market capitalisation of $2.1 billion.

The post Why is the Webjet (ASX:WEB) share price flying 4% higher today? appeared first on The Motley Fool Australia.

More reading

• Why Bank of Queensland, Imugene, Webjet, and Zip shares are pushing higher
• Why has the Australian Ethical (ASX:AEF) share price tanked 17% in a week?
• Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) share prices hit by broker downgrade
• Here’s why ASX 200 travel shares are taking off today
• ASX 200 (ASX:XJO) midday update: Zip update impresses, BOQ rises

Motley Fool contributor Sebastian Bowen 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 recommended Corporate Travel Management Limited, Flight Centre Travel Group Limited, and Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Black Rock Mining Ltd (ASX: BKT) share price is pushing higher on Tuesday. This comes after the company provided investors with an update in regards to its Mahenge graphite project in Tanzania.

During mid-afternoon trade, the Australian mining company’s shares are swapping hands for 22 cents, up 18.92%.

What did Black Rock announce?

Investors are driving up the Black Rock share price following an expected positive outcome from the Government of Tanzania.

In its release, Black Rock said it had received an invitation to attend a ceremony in Dar es Salaam, Tanzania. The company hopes to reach a final agreement on the Mahenge project with the Tanzanian government at the event, scheduled for 13 December.

Signifying the importance of the meeting, the company’s managing director, John de Vries, is currently in Tanzania and will attend.

Quick take on Black Rock

Established in 2000, Black Rock is an Australian mining company focused on developing its Mahenge project. It is known to be the world’s fourth-largest graphite resource, indicating huge potential for the future.

Demand for graphite has grown considerably and is expected to double in the next decade. This is due to the strong adoption by consumers for batteries in electric vehicles and other emerging applications.

A strategic alliance with the POSCO Group saw an equity investment of US$7.5 million for the development of the Mahenge project. This enabled Black Rock to complete detailed engineering, early site clearance planning, and commercial-scale product qualification.

The company is now construction-ready. However, this is subject to financing and confirmation of the Tanzanian Government free carried interest agreement.

Black Rock share price summary

Over the past 12 months, the Black Rock share price has surged by more than 140%. This year to date is has accelerated 120%. The company’s shares have gradually increased throughout the period on the back of investor hype in the graphite space.

Black Rock commands a market capitalisation of around $181.75 million and has approximately 865.49 million shares outstanding.

The post The Black Rock Mining (ASX:BKT) share price is rocketing 19%. Here’s why appeared first on The Motley Fool Australia.

More reading

• Why Bank of Queensland, Imugene, Webjet, and Zip shares are pushing higher
• Here’s why the Chalice Mining (ASX:CHN) share price is in the spotlight today
• Why has the Australian Ethical (ASX:AEF) share price tanked 17% in a week?
• The Altium (ASX:ALU) share price is trading near all time highs. These brokers reckon there is more to come
• Imugene share price (ASX:IMU) pops 5% in cancer trial update

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 Bruce Jackson.

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In afternoon trade, the S&P/ASX 200 Index (ASX: XJO) is on course to record a solid gain. At the time of writing, the benchmark index is up 0.4% to 7,245.1 points.

Four ASX shares that are climbing more than most today are listed below. Here’s why they are pushing higher:

Bank of Queensland Limited (ASX: BOQ)

The Bank of Queensland share price is up 4.5% to $7.94. This follows the release of a trading update ahead of its annual general meeting. That update shows that the bank’s growth momentum has continued throughout the first quarter of FY 2022, with strong application volumes across both the housing and business lending portfolios.

Imugene Limited (ASX: IMU)

The Imugene share price is up 5% to 49.8 cents. This follows the release of an update on its Phase I clinical trial of Oncolytic Virotherapy CHECKvacc. According to the release, the company has dosed its second patient with triple-negative breast cancer (TNBC) at the City of Hope cancer research centre in Los Angeles.

Webjet Limited (ASX: WEB)

The Webjet share price is up 3.5% to $5.51. This gain appears to have been driven by optimism that the Omicron variant of COVID-19 won’t be as bad as first feared. This would be good news for travel markets, which the new variant threatened to derail.

Zip Co Ltd (ASX: Z1P)

The Zip share price is up 8% to $4.65 after releasing an update on its performance in November. The buy now pay later provider was on form again last month, delivering record monthly transaction volume of $906.5 million. This represents an increase of 52% or $310.5 million over the prior corresponding period and annualises at over $10 billion. Zip advised that this was underpinned by an 86% lift in transaction numbers to a record of 7.5 million and a 71% jump in customer numbers to 9.2 million.

The post Why Bank of Queensland, Imugene, Webjet, and Zip shares are pushing higher appeared first on The Motley Fool Australia.

More reading

• Imugene share price (ASX:IMU) pops 5% in cancer trial update
• Here’s why ASX 200 travel shares are taking off today
• Why the Bank of Queensland (ASX:BOQ) share price is racing 5% higher today
• ASX 200 (ASX:XJO) midday update: Zip update impresses, BOQ rises
• Zip (ASX:Z1P) share price jumps 9% after hitting $10 billion milestone in November

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended ZIPCOLTD FPO. The Motley Fool Australia has recommended Webjet Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Chalice Mining Ltd (ASX: CHN) share price is struggling today, despite no price-sensitive news having been released by the company.

However, it did provide the market with a non-price sensitive update on the demerger of its Australian gold assets.

At the time of writing, the Chalice Mining share price is $9.06, 0.06% lower than its previous close.

For context, the S&P/ASX 200 Index (ASX: XJO) is currently up 0.65%.

Let’s take a closer look at the latest news out of Chalice Mining.

Chalice Mining share price slips despite demerger update

The Chalice Mining share price is sliding amid news that the company’s spin-out, Falcon Metals Ltd’s initial public offering (IPO) has closed oversubscribed.

The IPO saw $30 million raised. It comprised of a priority offer for the parent company’s shareholders and a shortfall offer.

The offers saw 60 million Falcon shares sold for 50 cents apiece.

The parent company will also be issuing Falcon shares through a pro-rata in-specie distribution.

Shareholders will receive 1 Falcon share for every 3.034 (approximately) Chalice Mining shares held on 13 December.

At the offer price, assuming no additional shares are issued and no options exercised, the company is expected to have a market capitalisation of around $88.5 million upon listing.

Chalice Mining noted that the oversubscribed offer will see Falcon in a strong cash position when it floats on the ASX.

Falcon is now expected to float on 22 December under the ticker FAL.

It will hold the Pyramid Hill Project, Viking Project, and the Mount Jackson Project.

Its parent company today stated it will have a “unique platform to make a tier 1 gold discovery in Victoria and Western Australia”, with drilling activities expected to begin at Pyramid Hill in early 2022.

The demerger’s expected to help Chalice Mining focus on its Julimar Nickel-Copper-PGE Project.

Right now, the Chalice Mining share price is 110% higher than it was at the start of 2021. It has also gained 4.1% since this time last month.

The post Here’s why the Chalice Mining (ASX:CHN) share price is in the spotlight today appeared first on The Motley Fool Australia.

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• The Venture Minerals (ASX:VMS) share price is venturing 10% higher today
• Why API, Chalice Mining, GUD, and Worley shares are charging higher
• Here’s why the Chalice Mining (ASX:CHN) share price is glowing today
• These were the 5 best performing ASX shares in November
• Why Chalice Mining, CBA, Nufarm, and SEEK shares are sinking

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 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 Bruce Jackson.

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Investors might not be used to the Australian Ethical Investment Limited (ASX: AEF) share price having a rough time. After all, this is an ASX 200 share that has given investors close to a 150% return year to date in 2021 alone. But the past week has not been kind to this market darling.

Australian Ethical shares have lost a nasty 17% since just last Tuesday’s market close. That’s including the 4.12% drop to $12.10 a share that we see just this Tuesday so far. So what’s gone so wrong for Australian Ethical over the past week or so?

Well, the primary driver seemed to be the earnings guidance update the company released on 1 December. Australian Ethical reported a 9% increase in funds under management (FUM) against 30 June to $6.64 billion as of 31 October. It also informed investors that it is expecting underlying profit before tax to be between $5 million and $5.5 million for the half year ending 31 December. That’s an 8% or so increase on its half year to 31 December 2020.

It seems investors were expecting a little more from the company. That’s going off the fact that the Australian Ethical share price has lost just over 17% since this update was released. There have been no other major news or announcements out of the company since.

Digging into the Australian Ethical share price’s week of woe

Another concern could be Australian Ethical’s arguably lofty valuation. Even after the past week’s falls, Australian Ethical shares, as of today, still trade on a price-to-earnings (P/E) ratio of 138.9.

Here’s how an article in the Australian Financial Review (AFR) last week described this valuation:

The green mania has helped AEF’s valuation rocket 1465 per cent over the past five years to $1.57 billion. In other words, it’s a fund manager that trades on around 141 times profits.

To put that in context, if emerging markets were still an investment mania and Asia-focused [Platinum Asset Management Ltd (ASX: PTM)] traded on 141 times last year’s profit of $163.3 million, shares would sell for $39.22 on a $23 billion valuation today. In reality, they closed at $2.65 on Wednesday [last week] on a market cap of $1.55 billion…

So we might have an answer for Australian Ethical’s nasty week if we take all of this into account. Even so, investors perhaps can’t complain too loudly with a year to date gain of nearly 150% still under the belt.

At it current share price, Australian Ethical has a market capitalisation of $1.37 billion. Its trailing dividend yield is sitting at 0.57%.

The post Why has the Australian Ethical (ASX:AEF) share price tanked 17% in a week? appeared first on The Motley Fool Australia.

More reading

• Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) share prices hit by broker downgrade
• ASX 200 (ASX:XJO) midday update: Zip update impresses, BOQ rises
• Top broker tips 30% upside for the Brickworks (ASX:BKW) share price. Here’s why
• 5 things to watch on the ASX 200 on Tuesday
• Can NAB (ASX:NAB) shares ever close in on CBA’s market cap?

Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Australian Ethical Investment Ltd. The Motley Fool Australia has recommended Australian Ethical Investment Ltd. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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Shares in printed circuit board developer Altium Limited (ASX: ALU) are inching lower this afternoon and now trade less than 1% in the red at $41.01.

Altium shareholders will rejoice in the company’s performance over the past 3 months. Shares bounced off a low of $31.18 in late September and have been on the upward trajectory ever since, and are now trading near all time highs.

Has Altium passed its use-by date? Let’s take a closer look at what the experts think.

Does the Altium share price have the legs to keep rising?

Investors responded positively to Altium’s AGM last month, sending the stock over 5% higher on the day of the release.

The gain pushed out an extended bull-run for the company, which has climbed more than 31.5% in the last 3 months. In that period, it has traded as high as $43.18 – a record high for its share price.

Altium’s recent trading update has the team at investment bank Citi hot on its heels. The firm reckons that Altium is well on track to beat the consensus forecast on its annual revenue.

In a recent note to clients, Citi points out that Altium is tracking above the lower end of sales guidance of $209 million–$217 million and EBITDA margins of 34%–36%.

For reference, the consensus or average of analyst estimates on Altium’s revenue is currently at $212 million, Citi says.

It also acknowledges that Altium grew its cloud-platform user base by 35% since August, which it reckons is a positive catalyst for the share price, and consequently rates it as a buy.

Fellow investment bank Jefferies is on the same page as Citi when it comes to its assessment of Altium.

The firm reckons that Altium has potential to continuously capture market share of the enterprise market.

It too thinks Altium is a buy after re-rating the stock in a recent note to clients. In its reasoning, the firm says that it has spoken to an unnamed industry expert, as well as that Altium is cheaper and easier to use than products from its competitors.

Not only that, Altium’s cloud-service adoption and integration capacity is also attractive to Jefferies, alongside its recent trading update, further affirming the broker’s buy rating.

Jefferies values Altium at $48.83 after raising its price target by 66% in a recent model update.

Altium share price summary

In the last 12 months, the Altium share price has gained almost 13% after rallying more than 20% this year to date.

It has held gains over the past 3 months and is now up almost 2.5% in the previous month, having just come off its all time highs in early December.

The post The Altium (ASX:ALU) share price is trading near all time highs. These brokers reckon there is more to come appeared first on The Motley Fool Australia.

More reading

• 4 best-performing ASX tech shares in November
• Is Altium (ASX:ALU) still a takeover target at the current share price?
• These were the best performing ASX 200 shares last week
• Here are the top 10 ASX shares today
• 2 strong ASX tech shares growing rapidly

The author has no positions in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and has recommended Altium. 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 Bruce Jackson.

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The Imugene Limited (ASX: IMU) share price is up today on the back of a positive cancer treatment update.

Shares in the biopharma company are currently trading at 50 cents, up 5.26%.

Let’s take a look at what’s going on at Imugene.

What did the company announce?

The Imugene share price is climbing today after the company announced an update regarding a phase 1 clinical trial.

Imugene is developing therapies that aim to use the body’s immune system to treat cancer tumours.

Today, the company announced a second patient with triple-negative breast cancer (TNBC) has been given a dose of CHECKvacc.

CHECKvacc is an oncolytic virotherapy candidate currently in phase 1 clinical trial at the City of Hope cancer research centre in Los Angeles, USA. TNBC is an aggressive form of the disease with a survival rate of just 12 months.

The trial aims to evaluate the safety and efficacy of the administration of CHECKvacc in patients with metastatic TNBC.

The company says the current trial design will involve a dose escalation. It is also planning to expand the trial to 12 patients. The first patient treated with the cancer therapy has had no safety issues to date.

Comment from management

Speaking on the update that’s likely fuelling the Imugene share price today, managing director and CEO Leslie Chong said:

We hope that in time, CHECKvacc provides an improved outcome for the many women who are diagnosed every year with triple-negative breast cancer.

We look forward to seeing the results of this trial and bringing continued updates to the medical community and our stakeholders moving forward.

Imugene share price snap shot

In the past 12 months, the Imugene share price has soared by 298%. It has also risen 398% this year to date.

For perspective, the benchmark S&P/ASX 200 Index (ASX: XJO) has returned 9% in the past year.

The share price low this year is 9 cents, while the yearly high is 63 cents.

The post Imugene share price (ASX:IMU) pops 5% in cancer trial update appeared first on The Motley Fool Australia.

More reading

• Why is the Imugene (ASX:IMU) share price falling today?
• The Imugene (ASX:IMU) share price has rocketed 80% since August. Here’s why
• Here are the top 10 ASX shares today
• Why Calix, Imugene, Legacy Iron Ore, and Lovisa shares are charging higher
• Imugene (ASX:IMU) share price leaps 9% on Pfizer, Merck deal

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 Bruce Jackson.

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The Tesserent Ltd (ASX: TNT) share price is rebounding strongly from yesterday’s heavy falls. This comes after the company announced the acquisition of two companies, boosting its presence in the federal government cybersecurity space.

At the time of writing, the internet security services provider’s shares are fetching 16.5 cents apiece, up 10%.

Tesserent cements leading position in cybersecurity solutions

Investors are fighting to get a hold of Tesserent shares following the company’s positive update.

According to its release, Tesserent advised it has acquired Pearson Corporation and Claricent through two separate share purchase agreements.

Both companies were targeted due to their strong position in the federal government marketplace.

Based in Canberra, Pearson Corporation is an IT consulting firm that has demonstrated experience in information security management services. The company operates in both the public and private sectors, providing expertise in cybersecurity, Microsoft, Carbon Black, and Ivanti products.

Notably, its services have assisted in delivering Essential 8 compliance for Commonwealth entities around Australia.

Tesserent’s other acquisition Claricent is a private Australian company that specialises in governance risk and compliance (GRC) services.

Both additions are expected to immediately integrate into Tesserent’s ecosystem, particularly its North Security business. This area is tasked with leading the company’s federal government team by delivering deliver large multi-year projects.

Tesserent is set to pay $28.8 million for Pearson and $4.13 million for Claricent through a mix of cash and company shares. In total, the price tag of both acquisitions is $32.93 million.

The amounts are due to be paid in two instalments. Around 50% of the enterprise value will be paid on completion which is slated for December 2021. The remaining 50% is to be paid on the finalisation of audited accounts, estimated sometime in September 2022.

Tesserent chair Geoff Lord welcomed the newly-acquired businesses, saying:

… These acquisitions cement our position as the leading ASX-listed provider of cybersecurity solutions and services into Federal Government and the leading provider of Essential 8 consulting services, as well as contributing to our annual revenue and adding significant recurring EBITDA to the Group.

Tesserent share price summary

Despite the company’s latest announcement, the Tesserent share price has failed to take off in 2021, down more than 50%. The company’s shares reached a 52-week high of 44 cents in January, before gradually declining during the year.

Based on today’s price, Tesserent commands a market capitalisation of roughly $199 million and has approximately 1.21 billion shares outstanding.

The post Tesserent (ASX:TNT) share price leaps 10% on acquisition news appeared first on The Motley Fool Australia.

More reading

• What’s with the Tesserent (ASX:TNT) share price wobbles today?

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 Bruce Jackson.

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It has been a positive day for the Westpac Banking Corp (ASX: WBC) share price on Tuesday.

In afternoon trade, the banking giant’s shares are up almost 1% to $20.90.

Why is the Westpac share price rising today?

Today’s gain by the Westpac share price appears to be due to improving investor sentiment following a strong night of trade on Wall Street. That was driven by optimism that the Omicron variant may not be as bad as feared.

In addition, a bullish broker note out of Morgans on Monday may have given the Westpac share price a lift. Its analysts have reiterated their add rating and $30.50 price target, as well as dismissing concerns that the bank is a value trap.

Anything else?

While it is unlikely to be the reason the Westpac share price is rising today, the banking giant has announced a small acquisition.

According to the release, Westpac has agreed terms to acquire money management app, MoneyBrilliant, from AMP Limited (ASX: AMP) and management shareholders.

The release notes that MoneyBrilliant is a budgeting and cashflow tool that helps users manage their money by providing practical insights and displaying their financial accounts in the one place. This technology will ultimately be integrated into Westpac’s digital banking app.

Westpac’s Chief Executive of Consumer & Business Banking, Chris de Bruin, commented: “The acquisition of MoneyBrilliant is another important step in Westpac’s digital strategy. In recent years we’ve seen demand grow for simple and practical digital tools to help customers manage their personal finances. We look forward to further building on MoneyBrilliant’s existing capabilities and making these available to our customers.”

The transaction is expected to complete by next month, subject to various customary closing conditions. No details have been provided on the price Westpac has paid for the app.

The post Why did Westpac (ASX:WBC) just buy this app from AMP? appeared first on The Motley Fool Australia.

More reading

• These ASX 200 dividend shares have generous fully franked yields
• What is the outlook for interest rates in Australia? Here’s what Westpac thinks
• 5 things to watch on the ASX 200 on Tuesday
• Can NAB (ASX:NAB) shares ever close in on CBA’s market cap?
• Is the Westpac (ASX:WBC) share price a value trap or a bargain buy?

Motley Fool contributor James Mickleboro owns shares of Westpac Banking Corporation. 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 recommended Westpac Banking Corporation. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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The Fortescue Metals Group Limited (ASX: FMG) share price is underperforming today after getting slugged by a broker downgrade.

JPMorgan cut its rating on the ASX iron ore miner to “neutral” from “overweight” as it rebased its forecast for China’s steel output.

But it isn’t only the Fortescue share price that’s lagging. The Rio Tinto Limited (ASX: RIO) share price also got downgraded to “neutral” by the same broker today.

Fortescue share price falling behind

Shares in Fortescue slumped 0.5% to $17.07 while the Rio Tinto share price was trading close to breakeven during lunch time trade.

In contrast, the BHP Group Ltd (ASX: BHP) gained around 0.4% to $39.76 while the S&P/ASX 200 Index’s (Index:^AXJO) added 0.6%.

“We have rebased our China steel production estimates significantly lower (-7% in 2022) which leads us to cut iron ore prices to $92/90/t in 2022/23,” said JPMorgan.

“For the miners, our RIO and FMG NPVs fall 9-10% to within range of the share price. Given the relatively bearish China steel backdrop, we no longer see catalysts to drive a re-rating in the stocks.”

BHP share price dodges a bullet

The BHP share price could also have been hit by a downgrade, but the broker is restricted from giving a recommendation on the shares.

Further, iron ore contributes more to Fortescue’s and Rio Tinto’s bottom line than it does to BHP.

Large investment weighs on Fortescue’s outlook

But there’s another drag on the Fortescue share price. This relates to Fortescue Future Industries (FFI) – a pet project by Fortescue’s chair Andrew Forrest. FFI is developing hydrogen as a future fuel source to replace polluting fossil fuels.

“FMG’s ambitious hydrogen production target (15Mt by 2030) suggests material capex will need to be deployed in the short to medium term,” said JPMorgan.

“Under a higher iron ore price scenario, we believe investors would be willing to tolerate this (to some extent).

Our latest price deck leaves FMG with a relatively low FY23E FCF yield of 6%, meaning ND [net debt] will need to rise in order to accomplish FFI’s ambitions, and dividend payouts may come down.”

Rio Tinto share price also getting benched

Meanwhile, Rio Tinto’s recent disappointing production update contributed to the broker’s downgrade decision.

The ASX miner lowered its medium-term Pilbara capacity forecast to between 345 million tonnes (Mt) and 360Mt. Its initial estimate was 360Mt.

Further, Rio Tinto warned of ongoing cost pressure, lower quality ore output and significantly greater capex to sustain ore output.

JPMorgan’s 12-month price target on the Fortescue share price dropped $2 to $20 a share. It’s target on the Rio Tinto share price was lowered to $102 from $113 a share.

The post Rio Tinto (ASX:RIO) and Fortescue (ASX:FMG) share prices hit by broker downgrade appeared first on The Motley Fool Australia.

More reading

• ASX 200 (ASX:XJO) midday update: Zip update impresses, BOQ rises
• Could the BHP (ASX:BHP) dividend be set for a boost?
• Top broker tips 30% upside for the Brickworks (ASX:BKW) share price. Here’s why
• 5 things to watch on the ASX 200 on Tuesday
• Why did the Fortescue (ASX:FMG) share price outperform its sector today?

Motley Fool contributor Brendon Lau owns shares of BHP Billiton Limited, Fortescue Metals Group Limited, and Rio Tinto Ltd. 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 Bruce Jackson.

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