Antofagasta (LON: ANTO) Downgraded on Valuation Concerns After 65% YTD Rally

Antofagasta shares (LON: ANTO) are 1.4% lower today, and under a little scrutiny as analysts adjust their outlook on the Chilean copper miner. Shares are reacting to a recent downgrade, reflecting growing reservations about the company's valuation relative to its growth prospects.

Bernstein analyst Bob Brackett downgraded Antofagasta to “Market Perform” from “Outperform,” maintaining a price target of 1,950 GBp. This decision stems from the copper macro environment pushing the shares beyond what the firm considers a justifiable valuation, particularly after a 64.97% year-to-date increase.

This shift in sentiment is not isolated. Earlier in the year, RBC Capital Markets also downgraded Antofagasta to “Underperform,” citing valuation concerns alongside rising financial pressures. A significant capital expenditure program, including the $4.4 billion Centinela concentrator project, adds to the financial burden. RBC analysts also pointed to the stock's close correlation with COMEX copper prices, which were trading at a premium to LME prices, creating a vulnerability to potential price corrections.

However, not all analysts are bearish. JPMorgan, for instance, upgraded Antofagasta to “Overweight” in February, raising the price target considerably. This upgrade was based on a more optimistic view of the copper market, anticipating a V-shaped recovery fueled by Chinese stimulus measures.

JPMorgan also highlighted Antofagasta's projected increase in copper production, forecasting a 15% rise by 2027 and 30% by 2028 compared to 2024 levels. Barclays offered a similar, though less bullish, sentiment when they upgraded Antofagasta to “Equalweight,” noting that the stock's valuation had become more appealing.

Antofagasta's financial performance has been strong, with core earnings increasing by nearly 60% in the first half of the year. This surge was driven by higher copper production and elevated prices, fueled by growing demand from the energy transition and electric vehicle sectors. This positive performance led to a significant increase in the dividend payout, from 7.9 cents per share to 16.6 cents per share, and the company anticipates more than 30% growth in copper output in the medium term.