Copper Giant Freeport Slumps but Analysts See 33% Upside

Key Points

• Copper miners have beaten the S&P 500 by a solid margin over the past five years.
• With experts seeing copper prices riding higher long-term, giants like Freeport McMoRan have a strong tailwind.
• An unforeseen tragedy has caused Freeport shares to drop extensively, providing investors a chance to get in cheap.

Rare earth metal and gold mining stocks have been all the rage recently. However, some investors may not be aware that companies producing another key resource have also performed very well. That resource is copper, the industrial metal used in everything from renewable energy facilities to semiconductor manufacturing.

Over the past five years, copper giants like Freeport McMoRan NYSE: FCX and Southern Copper NYSE: SCCO have seen their share prices surge. As of the September 25 close, these stocks have provided total returns of approximately 144% and 246%, respectively. That significantly beats the S&P 500’s approximately 118% return in that time.

However, shares of Freeport McMoRan recently took a huge hit. Overall, the stock fell a combined 22% on September 24 and September 25. Below, we’ll break down what’s been driving the soaring prices of copper producers and provide an outlook on the industry. We’ll also detail the recent event that caused Freeport shares to tank. Freeport now looks like a solid value play for investors willing to take a long-term perspective.

All data is as of the September 25 close unless otherwise stated.

Copper: Surging Prices Have a Strong Chance to Continue

The price of copper has risen around 58% over the past five years, a huge contributor to the gains seen in copper producers. Increased demand and limited supply have driven this. Many expect copper prices to keep rising in the years to come, due to several factors.

That includes the increased need for electrical transmission as power grids expand in developed and developing economies. The increasing prevalence of electric vehicles (EVs) is also key. 

EVs require three to four times as much copper as gas-powered vehicles.

University of Michigan and Cornell University researchers suggest that copper prices must double well before 2050 to meet demand. That forecast specifically pertains to maintaining historical demand trends. It doesn’t include possible aggressive EV and renewable energy policies, which could increase prices.

This supports a bullish outlook for current copper miners, such as Freeport.

Freeport’s Tragedy Sends Shares Plummeting

On September 9, Freeport announced that a mudslide occurred at its Grasberg Block Cave underground mine in Indonesia. The company halted operations at the mine to search for seven missing mining team members trapped there.

Tragically, the company later discovered that two mining team members had died as a result, and five others remain missing. The company also provided key financial updates concerning this event on September 24.

In Q3, the company expects copper sales to be 4% lower than past estimates and gold sales to be 6% lower. It also sees a significant reduction in planned production for the rest of 2025 and 2026.

Specifically, for 2026, the company says its Indonesian production could be 35% lower than pre-incident estimates. Production could potentially return to pre-incident levels by 2027.

With such a large decrease in production estimates at one of the firm's most important mines, the markets sold off the stock significantly.

Still, the Grasberg incident is a key case of how long-term investors can benefit from short-term disruptions. Freeport could return to pre-incident production levels in two years or less, making its long-term outlook similar. 

However, the stock is now trading at a significantly lower price. Thus, taking advantage of this creates an opportunity to achieve outsized gains in Freeport shares. Looking at industry valuation data confirms this.

Freeport Trades Well Below Peers, Analysts Eye +30% Upside

Freeport trades at a forward enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) ratio of 5.8x. This metric helps compare companies with different capital structures and profitability levels. 

The average forward EV/EBITDA ratio among 13 large-cap copper mining stocks is 9.5x. This indicates that Freeport is now significantly undervalued compared to its peers.

Notably, the MarketBeat consensus price target on Freeport now sits at $47, implying 33% upside in shares. Among analysts who updated their forecasts on Sept. 24 and 25, the average target is only slightly lower at $46.

Additionally, Wall Street price targets tend to look 12 months out, when Freeport will still be highly affected by the Grasberg incident. Thus, the longer-term opportunity for Freeport shares looks significantly larger than these forecasts imply.

Still, investors should note that the stock could continue facing near-term pressure with sentiment down.