Investing.com -- Shares of Anglo American (JO:AGLJ) rose over 3% on Friday following an upgrade from Jefferies, which raised its recommendation on the stock to "buy" from "hold."
Analysts at Jefferies cited several reasons for their optimistic outlook, including ongoing restructuring progress, improved operational performance, and potential for merger and acquisition activity.
Jefferies has set a new price target of 2,850 pence for Anglo American, a 19% increase from the stock's recent closing price of 2,385 pence.
The analysts noted that Anglo’s shares have been trading at a 15% discount to their sum-of-the-parts valuation, offering attractive value despite the risks associated with its restructuring efforts.
This restructuring includes the planned demerger of its stake in Anglo American Platinum and the recent sale of its metallurgical coal business.
The restructuring process, while still fraught with uncertainties, has shown notable progress.
Anglo American's sale of its coal assets, projected to be worth up to $4.1 billion depending on coal prices and operational milestones, and the gradual divestment of Amplats are expected to streamline its portfolio and unlock shareholder value.
The complete demerger of Amplats, slated for 2025, is viewed as a catalyst for the stock. In addition, Jefferies highlighted improvements in Anglo's operational performance, including production increases and cost reductions, as key factors in the company's strengthened position.
Anglo is expected to benefit from resilient prices for iron ore and a favorable outlook for copper. The analysts also pointed to the potential for M&A interest, especially as the company becomes a more streamlined and attractive target following its restructuring.
While challenges remain, particularly in managing the timing and full realization of value from its ongoing changes, the combination of operational enhancements, capital returns potential, and strategic catalysts underpin Jefferies' upgraded recommendation.