The Fortescue Metals Group Limited (ASX: FMG) share price has had a decent start to the week.
The iron ore producer's shares are up 1.5% to $4.62 in late afternoon trade.
Can its shares go higher?
As far as one of Australia's leading brokers is concerned, Fortescue's shares could still climb significantly higher from here.
According to a note out of Citi, analysts at the investment bank have upgraded the iron ore giant to a buy rating from neutral.
Furthermore, the broker has increased the price target on its shares to $5.40 from $5.10. This represents potential upside of almost 17% from the current share price.
The broker has upgraded Fortescue following a positive revision to its commodity price forecasts due to stronger-than-expected Chinese growth and reforms on the supply side.
According to Citi's forecasts, it expects the benchmark iron ore fines to average US$64 a tonne in 2018. The iron ore price is currently fetching US$70 according to Metal Bulletin.
Fortescue wasn't the only iron ore miner that was upgraded by Citi. The shares of BHP Billiton Limited (ASX: BHP) and Rio Tinto Limited (ASX: RIO) have also been upgraded to buy ratings as a result of this positive revision.
Should you invest?
While my preference in the industry is BHP due to its exposure to an improving oil price as well, I do think that Fortescue could be worth considering in 2018.
Especially considering its plan to provide higher grade iron ore in FY 2018. This should help solve the problem of the ever-expanding discounts it has faced with its low-grade product.
