Whitehaven Coal Ltd (ASX: WHC) shares skyrocketed in 2022 to reach an all-time high of $11.04 in October.
Australia's second-largest coal miner was the best performer of the ASX 200 last year, with a stunning 261% gain in the share price.
It came on the back of record coal commodity prices driven by sanctions on Russian supply and Indonesia's coal export ban.
This led to record profits for many coal miners including Whitehaven, which racked up a record $1.95 billion net profit after tax (NPAT) in FY22.
But that was then, and this is now.
Whitehaven shares closed the session yesterday at $6.26, down 0.32% for the day and 43% lower than their record high.
What's dragging down Whitehaven shares?
The same factor that sent them skyward in 2022 is now pulling them back down to Earth.
Falling commodity prices are dragging down the share prices of all ASX coal stocks in 2023.
Newcastle coal futures have fallen to US$132 per tonne, the lowest level since June 2021 and down 71% from the record high of $457.80 reached in September 2022.
Trading Economics analysis explains that a subdued economic recovery in China and historically high inventory levels of coal there are dampening demand for imports.
Falling natural gas prices have also led to Europe consuming less coal.
Back in April, Whitehaven downgraded its FY23 sales and production guidance.
So, are Whitehaven shares now back to fair market value and should you buy?
Are Whitehaven shares a buy following the 40% fallback?
Top broker Morgans sure thinks so.
In fact, it thinks the Whitehaven share price could ascend by more than 50% from here.
As my colleague James reported last week, the broker believes Whitehaven shares are dirt cheap on today's valuation.
Morgans said:
WHC looks far too oversold on the recent NEWC correction (FY23F FCF yield +40%, P/NPV 0.69x) …
The broker has an add rating and a $9.60 price target on Whitehaven shares. This implies a potential upside of 53% for investors today.
Looking ahead, the broker expects improved thermal coal prices to be a "key catalyst for WHC".
Thermal coal is one of the very few commodities that are rising in FY23, according to the latest data published by the federal Department of Industry, Science and Resources.
Thermal coal averaged US$245 per tonne in FY22 and is expected to average US$313 per tonne in FY23.
In terms of whether to buy Whitehaven shares, it's worth noting that commodity prices are expected to decline over the next five years.
This is worth considering given that commodity-related ASX shares tend to fall in line with the prices their products are fetching on global markets.
The federal industry department expects metallurgical coal to fall from an average price of US$296 per tonne in FY22 to US$185 per tonne in FY28.
It expects thermal coal to drop from US$313 per tonne in FY22 to US$103 per tonne in FY28.
Despite this, analysts seem to have a relatively positive collective view of Whitehaven shares right now.
According to Westpac Trading data, 13 analysts have ratings on Whitehaven shares.
Six analysts rate the coal stock a strong buy, two give it a moderate buy, and five say hold.
What about Whitehaven dividends?
Morgans is expecting Whitehaven to pay a dividend of 60 cents per share in FY23 and FY24.
This implies a yield of 9.6%.
