Anglo American Shares (AAL) Pull Back Despite Aggressive Price Target Hike

Anglo American shares (LON:AAL) slipped 1.88% in morning trading on the London Stock Exchange, even as Citi delivered a resounding vote of confidence by upgrading the mining giant to Buy from Neutral and raising its price target to 4,500 GBp from 3,300 GBp.

The disconnect between analyst optimism and market sentiment underscores the complex crosscurrents facing the diversified miner as it reshapes itself into a copper-focused powerhouse.

The upgrade from Citi centers on Anglo American's substantial exposure to copper, with analysts noting that 80% of the company's earnings now derive from the red metal. The firm described Anglo American as positioned to become a top-tier player in the copper space, a strategic pivot that comes as global demand for the metal intensifies amid the energy transition and electrification trends.

The muted market reaction follows a period of intense strategic transformation at Anglo American, and a sharp pullback in commodity prices in recent sessions. The company has been actively streamlining its portfolio, divesting coal and nickel assets while progressing with the demerger of its platinum group metals operations. These moves are designed to sharpen the company's focus on copper and premium iron ore, theoretically unlocking value and improving operational efficiency. Yet the market's hesitation suggests that the benefits of this restructuring may already be priced into the shares.

That view was echoed by Citi itself in December, when the bank reinstated coverage with a Neutral rating and a 26.00 GBp price target, arguing that the current share price already reflected the anticipated gains from portfolio rationalization. The apparent contradiction between December's neutrality and the latest upgrade to Buy highlights how quickly analyst sentiment can shift in response to commodity price movements and strategic execution milestones.

Barclays offered a more tempered perspective in June, trimming its price target to 26.00 GBp from 26.50 GBp while maintaining an Overweight rating. The firm acknowledged that restructuring should enhance EBITDA margins and returns on capital employed between 2026 and 2028, but cautioned that absolute EBITDA estimates post-restructuring could be lower by 21% to 27% compared to pre-restructuring forecasts. This suggests that while Anglo American may emerge as a leaner, more focused operator, the path to improved profitability may involve near-term earnings headwinds.

Valuation concerns have also surfaced. JP Morgan warned in January that Anglo American stock was becoming too expensive, trading at a 6% premium to standalone fair value. The firm suggested that the share price already incorporated a mergers and acquisitions premium, reflecting market speculation about potential consolidation in the mining sector, particularly following BHP's abandoned takeover approach. Should no deal materialize, the stock could face downward pressure as that premium unwinds.

Not all analysts share the cautious stance. SP Angel reiterated its Buy recommendation in September, with an average one-year price target of $34.39 per share, representing a 13.83% increase from prevailing levels at the time. This bullish view reflects confidence in Anglo American's copper strategy and its ability to capitalize on structural demand growth for the metal.

Price Targets

With the Anglo American share price continuing to trade 10% higher through 2026 despite this morning's pullback, the rally in commodities that had pushed share prices to new highs is naturally having a negative impact on the downswing. It may take a little time for all the froth to come out of the sector and for prices to stabilise, but for now at least, Citi for one remain firmly bullish from here.