Merrill Lynch/BAM is out with a major call upgrading span style=”font-weight: bold;”Freeport-McMoRan (NYSE:FCX) /spanto Buy from Underperform and raising their target price to $87 (prev. $49).br /br /According to the firm the upgrade is based on a material upgrade to their copper price forecasts. Freeport is the largest pure-play copper miner and provides high leverage to firm’s more positive copper view. Sensitivity to copper prices: a $0.10/lb change in copper is roughly $0.50 in EPS for FCX. span style=”font-weight: bold;”They are raising their 2010 EPS to $9.25/sh (was $2.85)./span At this level of EPS, FCX should be able to generate over $10bb EBITDA and $10/sh of FCF. Dividend reinstatement also a high probability event for 2010.br /br /span style=”font-weight: bold;”Move copper outlook to high-end of Street/spanbr /Firm is incorporating new base metal forecasts into our models. Their new copper price deck is as follows: 2009-$2.15/lb (was $1.76), 2010-$3.18/lb (was $2.00), 2011-$3.03/lb (was $1.90). Gold outlook remains unchanged at $1050/oz for 2010. New copper forecast is well above consensus in the $2.00/lb range and above the forward copper price of $2.70/lb. The drivers of more positive view on copper are:br /br /1) a tight concentrate market;br /br /2) lack of new supply in the pipeline;br /br /3) an end to de-stocking; andbr /br /4) improving demand in OECD/China.br /br /span style=”font-weight: bold;”Merrill Lynch sees copper as structurally one of the best positioned base metals over the long term. /spanFirm notes their prior Underperform was predicated upon an end to Chinese stockpiling leading to higher LME inventories and a downward correction in commodity prices. However, despite a 70% YTD rise in Chinese copper imports, underlying demand appears to be recovering and should be sustainable into 2010.br /br /span style=”font-weight: bold;”Increase PO to $87 on higher 2010 outlook/spanbr /They are increasing their price target to $87 (was $49), given the magnitude of our 2010 EPS revision. Firm’s target multiples for P/E, EV/EBITDA, and P/B are generally consistent with their prior PO and in line with midcycle multiples. Based on the current FCX price, they see roughly 35% upside to revised target.br /br /span style=”color: rgb(255, 0, 0);”Notablecalls:/span I view this as a more technical call than anything else. The chart looks like it wants new highs and Merrill/BAM provides the mo-mo crowd the reason to push for a breakout. span style=”font-weight: bold;”br /br /I see them gunning for $67+/spandiv class=”blogger-post-footer”img width=’1′ height=’1′ src=’https://blogger.googleusercontent.com/tracker/29297569-1078916621500135729?l=notablecalls.blogspot.com’//div

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