Freeport-McMoRan Sheds 30% Of Its Value In 45 Days; Can It Outperform Post Coronavirus?

Freeport-McMoRan’s (NYSE: FCX) stock is very likely to outperform the broader S&P 500 index post coronavirus and oil price war crisis, going by the trends seen during the 2008 slowdown, where it fell 72% from the approximate pre-crisis peak in 2008, and recovered by a whopping 164% by early 2010. The decline in Freeport-McMoRan’s stock and recovery was higher than that of the S&P 500. We compare the performance of Freeport-McMoRan vis-à-vis the S&P 500 in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: How Did Freeport-McMoRan Stock Fare Compared With S&P 500?

On Monday, March 9, the stock markets saw their biggest sell off since the 2008 crisis, with the decline continuing throughout the week. There were two distinct trends driving the sell-off. Firstly, the increasing number of coronavirus cases outside China is causing mounting concerns of a global economic slowdown. Secondly, crude oil prices plummeted by more than 20% after Saudi Arabia increased production. Freeport-McMoRan’s stock fell about 20% between 8th March and 13th March 2020, and is down by a total of 32% since early February, considering the impact that the outbreak and a broader economic slowdown could have on gold and copper prices and demand, and the global mining industry.

Moreover, though Freeport-McMoRan’s products do not have much exposure to China, the gold and copper demand from China affects global price levels of these commodities to a large extent, in turn impacting the company’s price realization for its products. Higher gold demand for investment purposes is offset by lower demand for copper from automobile and other industries. With copper contributing almost 50% of FCX’s revenue, copper prices have a much larger effect on FCX’s stock.

Additionally, with the outbreak and spread of coronavirus expected to lead to further slowdown in economic activity and demand, global copper prices are expected to remain under pressure. However, going by the trends seen during the 2008 economic slowdown, it’s likely that Freeport-McMoRan’s stock could bounce back strongly and potentially outperform the market as the crisis winds down.

Below we discuss how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500. View our complete dashboard analysis on 2007-08 vs. 2020 Crisis Comparison: How Did Freeport-McMoRan Stock Fare Compared With S&P 500?

Freeport-McMoRan Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

• Freeport-McMoRan’s stock declined by about 20% between 8th March 2020 and 13th March 2020, and the stock is down by about 32% since February 1, after the WHO declared a global health emergency.
• The S&P 500 declined by 9% between 8th March 2020 and 13th March 2020, and has fallen by 19% since February 1, after the global health emergency was declared by the WHO.
• We also compare the current coronavirus crash to 4 other market crashes here.

Freeport-McMoRan versus the S&P 500 During 2007-08 Financial Crisis

• FCX stock declined from levels of around $42 in October 2007 (the pre-crisis peak) to levels of around $12 in March 2009 (as the markets bottomed out) and recovered to levels of about $31 in early 2010.
• Through the crisis, FCX stock declined by as much as 72% from its approximate pre-crisis peak. This marked a lower decline than the S&P which fell by as much as 51%.
• However, the stock recovered strongly, rising by 164% between March 2009 and January 2010. In comparison, the S&P rose by about 48% over the same period.

Conclusion

While Freeport-McMoRan’s stock has declined due to the Coronavirus/Oil Price War crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly and potentially outperform as the crisis winds down.

For more detailed charts and a timeline of the 2008 and 2020 crisis for different stocks, view our interactive dashboard analyses on coronavirus.