Chris LaFemina, an analyst from Jefferies, has initiated a new Hold rating on Alpha Metallurgical Resources (AMR).
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Chris LaFemina has given his Hold rating due to a combination of factors related to Alpha Metallurgical Resources’ current market position and financial strategy. The company is the largest US producer of metallurgical coal and is significantly affected by fluctuations in met coal prices. Historically, Alpha has focused on share buybacks rather than growth, and while a recovery in met coal prices is anticipated, it may take over a year to realize substantial benefits.
Alpha’s financial strategy involves using free cash flow primarily for share repurchases, which could lead to strong performance during market upturns. However, the current weak coal prices have delayed capital returns, impacting the company’s immediate financial outlook. Although there is potential for long-term upside in the share price as coal prices recover, the current valuation, based on a discounted cash flow analysis, suggests a fair value of $110 per share. This outlook, combined with the company’s limited organic growth prospects and reliance on coal price recovery, supports the Hold rating.
LaFemina covers the Basic Materials sector, focusing on stocks such as Glencore, Anglo American, and Cleveland-Cliffs. According to TipRanks, LaFemina has an average return of 4.4% and a 47.51% success rate on recommended stocks.