Evaluating Freeport McMoRan: A Risky Yet Promising Investment Opportunity

FCX stock has moved up and down along with the price of copper. In fact, the similarities between the two charts are eerie. The long-term outlook for copper demand remains strong. But does that mean this is a time to buy FCX stock? 

Uncertainty Is Driving Short-Term Sentiment

Investors have heard enough about tariffs in the last few months to last a lifetime. And now that President Trump is in the White House, the administration’s tariff plans are starting to take shape.

As part of President Trump’s initial wave of executive orders, the administration plans to impose 25% copper tariffs on Canadian and Mexican copper starting on February 1. Although Freeport-McMoRan doesn’t have mining operations in those countries, it could be impacted if Canada and Mexico imposed retaliatory tariffs on imported copper. 

The company is also engaged in a dispute with the Indonesian government over its ability to export copper concentrate. Freeport’s license expired in December, and some analysts are expressing concern about the company’s ability to get an extension. A delay would result in cuts to production and sales in the current quarter.

As if that wasn’t enough, investors also need to consider the rise in the U.S. dollar. The spot price of commodities, such as gold and copper, has an inverse relationship to the dollar, so when it’s rising, the spot price of metals declines. 

There’s Still a Lot to Like About Freeport’s Fundamentals

Despite the top-line miss, Freeport-McMoRan noted that both copper and gold sales came in above the company’s October 2024 guidance. Unit net cash costs were also below the October guidance. 

It’s also important to remember that, prior to the report, FCX stock was up 5.7% in the first two weeks of the new year. The enthusiasm for the company’s stock has to do with the expected demand for copper to rise. Freeport-McMoRan is one of the leading miners of copper and offers investors a stable balance sheet and plenty of production. 

Let Copper Be Your Guide With FCX Stock

Investors have a pretty tall wall of worry to climb before they want to invest in FCX stock. However, all the concerns are short-term and don’t impact the longer-term outlook for copper, which will be essential for meeting the growing demand for new energy and power applications.

Freeport-McMoRan has solid fundamentals. In the fourth quarter, the company reported full-year copper and gold production volumes that exceeded sales volumes, and it increased its production outlook for both copper and gold. 

That said, for those that place a value on price-to-earnings numbers, you’ll be paying a premium for FCX stock that trades around 25x earnings. The sector average for basic materials stocks is around 19x earnings.