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Vale (RIO) Sinks Despite Goldman Upgrade, Barron's Tout
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Shares of Companhia Vale do Rio Doce, or Vale, (NYSE: RIO) are down more than 4%, or about $1.34, to $29.31 today. The stock is now down more than 33% from its 52-week high of $44.15, which was set on May 19.
Today, several positive news items have failed to offset the announcement that Vale's recent stock offering was less successful than the company had hoped for. Late last night, Vale announced that it raised about $12.17 billion in a stock offering, but that amount of capital was below what it had previously anticipated.
Unfortunately for current Vale shareholders, the news hit on the same day that the stock was highlighted positively in a Barron's article. The article cites analysts from Canaccord Adams and Deutsche Bank, both of which have Buy ratings on Vale. Gary Lampard, the Canaccord analyst, has a price target of $44, while Jorge Beristain, the analyst from Deutsche, has a $52 price target on the stock. According to Beristain's target, Vale could see upside of more than 77% from current levels over the next year.
Additionally, Goldman Sachs upgraded Vale this morning from Neutral to Buy and set a $42 price target, saying valuation has fallen too much and that the company will outperform its peers. As Goldman is often considered the most trusted bank on Wall Street, their rating changes often cause an appropriate move in the stock, although this has not been the case today.
With so much recent downside and a clear bullish analyst sentiment toward shares of Vale, it appears the market has given investors not yet involved in the stock an opportunity to back the truck up today.
Companhia Vale do Rio Doce, or Vale, is a metals and mining company.
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Overselling of RIO VALE
Biohitechinvestor on Jul 18, 2008 12:58 AMLike everything else the markets have done lately, RIO is simply oversold. The markets have taken things to the extreme in both directions. It seems that this is what has taken place with RIO. Look at the financials..some are selling at 1/3 or 1/4 of what they were selling for just a year ago...which seems ridiculous. But when the markets realize the mistake it has made it makes up for it with a passion. I feel that the demand for metals is strong. Yes, producing those metals is more expensive, but the demand will be there for years to come. Right now China and India seem to be the driving force for that demand but when the global economy starts stabilizing, then the demand for those metals will start only to escalate. This is of course just the way I see things.