After losing nearly 5% last Friday amidst fears of an impending trade war, shares in Whitehaven Coal Ltd (ASX: WHC) are springing back today, up 5% to $4.47 on the news that Morgan Stanley upgraded the coal miner from equalweight to overweight.
According to The Australian Financial Review, improved coal price expectations and Whitehaven's strong balance sheet were the reasons behind the upgrade.
Whitehaven delivered a solid half-year result mid-February, with earnings surging on the back of increasing coal prices. Operating cash flow grew 68% on the previous year to $400 million, allowing the company to slash its debt and resume paying dividends.
Last week Whitehaven acquired a 75% interest in the Winchester South coal project for US$200 million from Rio Tinto Limited (ASX: RIO).
Analysts at Morgan Stanley consider the stock cheap given the company's improved financial metrics and growth potential, and raised the price target for Whitehaven from $5.05 to $5.70, with a valuation of $6.25 in the base case scenario.
