The OZ Minerals (ASX:OZL) share price has dumped 11% this week. Is it a bargain?

The brokers are chatting after OZ’s results yesterday.

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Key points

  • OZ Minerals shares are down 11% so far since last Friday’s close
  • Despite the bearishness, the team at Citi upgraded its rating to a buy
  • The broker raised its price target on the stock by 8% to $29.10 in doing so
  • Meanwhile, analysts at Jefferies dropped their recommendation from a buy to a hold, alongside a suite of other brokers

The OZ Minerals Ltd (ASX: OZL) share price has been in the red since the market open today and is now trading 2.63% lower at $24.84.

Today’s slip continues an 11% run into the red that OZ Minerals shares have embarked on this trading week. They have also plunged by 12% over the past month.

Despite the weakness, the team at investment bank Citi are constructive on the OZ Minerals share price and revised its rating on the stock in a note today.

Citi upgrades OZ Minerals from neutral to ‘buy’

Investors were quick to punish OZ Minerals following the release of its Q4 earnings and activities update yesterday. Moreover, the company also laid out guidance that was weaker than expected, and the OZ Minerals share price ended the day 2.89% lower

Yet, despite the bearishness, the team at Citi have a contrarian flavour to its view and reckon the company can outperform in 2022.

The broker lifted its rating on the stock from neutral to a ‘buy’ in its assessment. Citi’s move is underscored by its positive outlook on copper, which the firm is also bullish on.

Copper shot to fame throughout the pandemic. However, prices have since cooled off and have been largely trading sideways since May last year. Even so, the brown metal is now trading 24% higher than it was 12 months ago and has a strong growth outlook given demand out of China and a growing addressable market.

These factors make OZ’s share price and earnings outlook more attractive given the risk-reward calculus that could be skewed in the investor’s favour.

“We concede Oz Minerals is not a free cash flow yield stock but its growth options and low-risk asset locations make it a standout on the global stage,” Citi said.

Citi also notes its buy thesis “requires investors to be on board with Citi’s multi-year decarbonisation-driven bull thesis of US$4.0/lb long term”.

The broker raised its price target on the stock by 8% to $29.10 in its research update, concurrently rating OZ Minerals as a ‘buy’ in doing so.

What do other brokers say about the OZ Minerals share price?

A slew of other brokers slashed their valuations on the company and readjusted their bullish stance on its outlook. Goldman Sachs, JP Morgan, Macquarie and Morgan Stanley wound back their valuations of the stock following the result.

Analysts at Jefferies also changed posture on the OZ share price following the revised guidance outlook that was provided in the company’s quarterly report.

“While we have increased our cumulative project capex estimates for Prominent Hill and Carrapateena out to 2025, we have also redistributed such that more is being incurred during 2022 and 2023,” the firm says.

The broker subsequently dropped its recommendation from a buy to a hold today, revaluing the company at $27.50 – in direct contrast to its counterpart Citi.

OZ Minerals share price snapshot

In the last 12 months, the OZ Minerals share price has climbed by around 33%. However, it has struggled this year to date and is down 12.5%.

Should you invest $1,000 in OZ Minerals right now?

Before you consider OZ Minerals, you'll want to hear this.

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The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.* And right now, Scott thinks there are 5 stocks that are better buys.

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Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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