Market watchers might be considering investing in Fortescue Metals Group Ltd (ASX: FMG) after the recent tumble in its share price. The stock has dropped more than 10% from its year-to-date high, reached in February.
Right now, the Fortescue share price is $20.96. Does that make the S&P/ASX 200 Index (ASX: XJO) iron ore giant a buy? Let's take a look.
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Are Fortescue shares a buy at their current price?
Expert opinions on the stock's future are mixed. That's probably at least partly due to expectations for the price of iron ore, which currently sits at around US$132 a tonne. The company's profits are closely tied to the commodity's value.
CommSec, for one, is slightly bearish on iron ore after its recent rally. It tips the commodity's value to fall to US$100 a tonne this year, my Fool colleague Bronwyn reported last month.
Meanwhile, Goldman Sachs expects the iron ore price to reach US$150 a tonne in coming months before falling to US$120 a tonne for 2023. However, that bullish forecast isn't reflected in the broker's outlook for Fortescue.
It predicts the iron ore giant's stock will tumble 27% to $15.50, alongside its dividends.
It believes Fortescue's valuation is higher than those of ASX 200 peers BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO). It's also wary of the company's green energy leg Fortescue Future Industries and its multi-billion-dollar Pilbara decarbonisation strategy.
But not all are so sceptical. Fairmont Equities' Micheal Gable labels the stock a hold, saying as per The Bull:
Recently, [Fortescue] enjoyed solid buying support and we believe the technical chart continues to look bullish.
I also think it's worth considering Fortescue's green energy ambitions. The company is aiming to be a leader in the hydrogen and battery space, as my colleague Tristan recently outlined. No doubt the green energy sector houses mountains of potential.
However, in my opinion, the current Fortescue share price doesn't represent good value.
