The Gernan bank has moved its rating to ‘sell’ from ‘hold’ for the FTASE 100-listed firm, while the share price target is raised to 920p from 870p, although in comparison the current price is 1,082.5p.
“While we remain constructive on the outlook for copper, ANTO shares have been very strong YTD (+25% compared to +5-10% for peers and +5% for the copper price) with no obvious underlying operational drivers,” Fitzpatrick said in a note to clients.
The analyst added that selling Antofagasta shares could be a short-term investment idea.
“While we remain constructive on the outlook for copper, ANTO shares have been incredibly strong YTD (+25% compared to +5-10% for peers and +5% for the copper price) with no obvious underlying operational drivers.
“Cash flows will remain constrained with a material step-up in capex expected in H220 and 2021, costs will increase in H2 following tailwinds in H1, political uncertainties in Chile persist (taxation risks?) and capex will remain structurally elevated for the next 3-5 years,” he added.
“Following good performance on costs in H1, we see these factors weighing on performance in H2,” the analyst concluded.
Fitzpatrick noted that Antofagasta’s valuation is at the top end of its range which has said has been a warning signal historically, meanwhile, the price is also at a significant premium to peers and DB’s core valuation.