Rio Tinto Shares Slide as Barclays Cuts Rating on Valuation and Iron Ore Concerns

Rio Tinto shares (LON:RIO) fell 0.7% to 7,111p this morning after Barclays downgraded the mining giant to Equal Weight from Overweight, citing seasonal headwinds in iron ore markets and an increasingly stretched valuation relative to rival BHP.

The move marks the latest in a series of analyst downgrades that have weighed on the stock in recent months, raising questions about the miner's near-term earnings trajectory.

Barclays reduced its price target to 6,600p from 6,885p, highlighting that Rio Tinto now trades at its tightest valuation spread against BHP since 2020. The firm noted that iron ore prices are approaching their seasonal peak, typically followed by a progressive decline through the fourth quarter.

This pattern suggests Rio Tinto's earnings momentum may weaken in the coming months, particularly given the company's heavy exposure to the commodity. The analyst also pointed to limited upside from potential asset sales, arguing that such catalysts are unlikely to deliver positive surprises for markets.

Analysts Trim Expectations

The Barclays downgrade follows a string of rating cuts from major investment banks. Goldman Sachs lowered Rio Tinto to Neutral from Buy on 23 February, trimming its price target to £74.00 from £79.00 after the company's 2025 financial results revealed underlying EBITDA of $25.4 billion and net profit of $10.9 billion, both slightly below expectations. Higher costs in North American primary metals and reduced bauxite revenue contributed to a $700 million shortfall in the aluminium segment, prompting concerns about cost discipline across the portfolio.

Morgan Stanley had already adjusted its stance in late January, moving Rio Tinto from Overweight to Equal Weight, while RBC Capital trimmed its price target to 5,900p from 6,100p on 20 February, maintaining a Sector Perform rating. Jefferies also downgraded the stock to Hold from Buy in mid-2025, reflecting a broader reassessment of the company's growth prospects and market positioning.

The combination of analyst scepticism, earnings underperformance, and strategic uncertainty has created a challenging environment for Rio Tinto shares. With iron ore seasonality expected to exert further pressure and valuation multiples now closely aligned with BHP, markets appear to be adopting a more cautious stance.