The Fortescue Metals Group Limited (ASX: FMG) share price had a subdued start to the week.
The mining giant's shares have just closed the day a touch under 1% lower at $18.21.
That's despite rivals BHP Group Ltd (ASX: BHP) and Rio Tinto Limited (ASX: RIO) both rising over 1%.
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Why did the Fortescue share price underperform?
Today's weakness in the Fortescue share price appears to have been driven by a lukewarm response to the company's latest quarterly update.
For example, the team at Morgans responded by maintaining its hold rating and cutting the price target on the company's shares to $17.40.
Based on the current Fortescue share price, this implies potential downside of 4.5% for investors over the next 12 months.
Morgans commented:
Despite recent share price weakness, we believe FMG is still trading around fair value and will look for further volatility before considering our investment view. We do see potential for the current volatility to push FMG into oversold territory.
What else?
Analysts at Goldman Sachs are far more bearish. In response to Fortescue's update, the broker retained its sell rating and cut its price target to $12.70.
Based on the current Fortescue share price, this suggests significantly more downside risk of 30% over the next 12 months.
Goldman believes its shares are extremely overvalued when compared to BHP and Rio Tinto. It explained:
The stock is trading at a significant premium to BHP & RIO; c. 1.5x NAV vs. RIO & BHP at c. 0.8x & 1x NAV, c. 5.5x EBITDA (vs. BHP on 5x & RIO on c. 3.5x), and c. 5% FCF vs. BHP & RIO on c. 8-12%.
In addition. the broker has concerns over "widening of low grade 58% Fe product realisations" and "uncertainties around Fortescue Future Industries (FFI) diversification and Pilbara decarbonisation."
