Morgan Stanley Says Slide in Ag Names 'Unfounded' (POT, MOS, AGU, CF, IPI)

Morgan Stanley is out with research notes on several top fertilizer stocks this morning: Potash Corp. (NYSE: POT), Agrium (NYSE: AGU), The Mosaic Company (NYSE: MOS), CF Industries (NYSE: CF) and the newcomer to the group, Interpid Potash (NYSE: IPI).

The firm started Potash at Overweight and set a $297 price target, Agrium at Overweight with a $143 price target, Mosaic at Overweight with a $155 price target and CF Industries and Interpid Potash with Equal Weight ratings and $180 and $65 price targets, respectively.

The new coverage is notable as the ag sector has taken a beating recently as investors have been focusing on a global demand slowdown for commodities across the board. According to the Market Vectors--Agribusiness (AMEX: MOO), a popular ag ETF, fertilizer stocks are now down more than 30% from their highs set in late-June.

Morgan Stanley said its new coverage on Potash, Agrium, Mosaic, CF and Interpid Potash is due to its belief that the slide in these ag names is "unfounded". Furthermore, the firm expects these companies to report peak earnings in 2011, suggesting that the fertilizer boom could be far from over.

Shares of Mosaic have lead the group lower since the groups peak: the stock has fallen about 46% since June and over 17% in just the last week. Potash is down more than 37% from its June high of $241, and down about 13% over the last week. Lastly, Agrium has fallen the least of the bunch, down about 35% from June and 12% since last Friday's closing price.

Morgan Stanley's targets suggest huge price appreciation over the next 12 months; based on current levels, the firm believes Potash, Agrium and Mosaic could rise as much as 98%, 93% and 76%, respectively, while the firm sees upside of about 76% and 46% for Interpid Potash and CF, respectively.

As Morgan Stanley is showing some conviction in a market where pundits are proclaiming a "burst bubble", investors seem to be cheering the research notes this morning: Potash is currently up 0.66%, Agrium is up 0.8%, Mosaic is up 1.4%, Interpid Potash is up 0.14% and CF is up 1.5%.

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