JPM upgrades Freeport-McMoRan on upside from tariff and supply tightness

Investing.com -- JP Morgan upgraded Freeport-McMoRan (NYSE:FCX) to Overweight from Neutral, citing upside potential from possible US copper tariffs and long-term supply challenges. The firm raised its price target to $52, implying a ~30% upside.

Tariff risk is likely to maintain premium pricing for the company’s US-based footprint for the foreseeable future, JPMorgan (NYSE:JPM) said, adding that supply deficits expected through the next decade would further support favorable pricing.

JP Morgan highlighted that a 10% premium to London Metal Exchange (LME) copper prices for US-based assets could generate $400-$450 million in incremental EBITDA annually for Freeport.

CEO Kathleen Quirk had said earlier this month that tariffs could add “~$400 million per year in incremental profits.”

If copper is declared a ‘critical mineral,’ the firm estimates Freeport could gain an additional $500 million annually from potential Inflation Reduction Act (IRA) tax credits.

In a more bullish scenario, a 25% tariff premium, similar to current Section 232 tariffs on steel and aluminum, could boost profits by around $1 billion.

JPMorgan expects copper supply growth to slow to 1% in 2025, down from 3% last year, while demand is projected to decelerate to 2.9%, with upside risk from potential Chinese stimulus.

Additionally, the firm highlighted that panic buying of US imports amid tariff concerns could weigh on the rest of the world’s inventories and drive LME pricing higher in the near term.

“FCX is advantageously positioned relative to pure-play peers to capture incremental upside,” JPMorgan noted, emphasizing that Freeport’s US-based operations and lack of royalties create a favorable margin profile.

JPMorgan views Freeport as a defensive play relative to growth-focused peers like Overweight-rated Teck Resources (NYSE:TECK).

The firm noted that Freeport has cleaned up its balance sheet and could reduce capex if needed. The company is expected to generate significant free cash flow (FCF) in 2025 and 2026, with JPM forecasting FCF yields of 4.5% and 7.5%, respectively.

JPMorgan concluded that despite recession concerns, Freeport’s exposure to potential US tariff protection and long-term supply deficits positions the company for significant upside.