CS First Boston downgraded Phelps Dodge (PD) to sell from hold.
Analyst Scott Morrison says he believes copper prices are likely to remain under pressure over at least the next six months due to record high inventory levels, continued surplus between supply and demand, and the overhang of potential capacity restarts. He says PD is valued at a significant premium to what he would consider a trough level. He notes with the recent rally in the share price, PD is valued at 152% of sales compared to typical trough level of 105%-110%.
He thinks investors should avoid PD in the current environment. He set a $24 12-month price target, which would bring the ratio of the company's enterprise value to its current sales to 120%.