Freeport-McMoRan’s Stock Slips Despite Rising Copper and Gold Prices

Freeport-McMoRan (NYSE: FCX), a leading copper producer, has experienced an 8% decline in its stock over the past month, in contrast to the S&P 500, which saw a 1% increase. This dip is notable, particularly as gold prices surged by 35% year-over-year to $2,568 per ounce in Q3 of 2024, and copper realizations also rose by 13% to $4.30 per ounce.

Current Valuation and Market Sentiment

Freeport’s valuation stands around $47 per share, which closely aligns with its current market price. This suggests that much of the good news surrounding copper and gold has already been taken into account by investors.

Growth Opportunities Amidst Economic Challenges

As one of the world’s largest copper producers, Freeport is poised to benefit from the long-term outlook for copper. While global economic data has affected copper demand, the Federal Reserve’s rate cuts and substantial economic stimulus in China have offered some relief. Increased demand for copper is driven by significant investments in electrical infrastructure and the growing need for AI data centers that require extensive power cabling. This trend has helped balance out declines in traditional sectors such as automotive and residential construction.

Gold’s Positive Impact and Stock Volatility

Rising gold prices add to Freeport’s stock value, contributing about 11% of its revenues from gold sales in 2023. With uncertainties surrounding the U.S. Presidential elections, gold prices have hit record highs. In Q3 of 2024, Freeport’s gold sales volume rose dramatically by 40% to 554 thousand ounces compared to the previous year.

Stock Performance: A Mixed Bag

The performance of FCX stock has shown significant volatility over the past three years. In 2021, it registered a remarkable 61% return, followed by a decline of 7% in 2022, and then a modest recovery of 14% in 2023. On the other hand, the Trefis High Quality (HQ) Portfolio, which includes 30 selected stocks, has consistently outperformed the S&P 500, providing a steadier investment experience.

Looking Ahead: Risks and Uncertainties

While the outlook for copper remains positive, Freeport’s performance may still be affected by fluctuations in the commodity market. A rise in copper prices could face challenges due to shifts in long-term expectations or changes in government policies. Additionally, the company’s extended El Abra project in Chile, which is expected to begin operations in 2033, could pose risks if it encounters delays or cost overruns.

[1] Returns as of 10/30/2024
[2] Cumulative total returns since the end of 2016

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.