Fortescue Metals Group Ltd (ASX: FMG) shares are pushing higher on Friday.
In afternoon trade, the iron ore giant's shares are up over 0.5% to $25.11.
This leaves the Fortescue share price trading within sight of its multi-year high.
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Are Fortescue shares a buy or a sell?
As has been the case for some time, none of the major brokers believe investors should be buying the miner's shares at current levels.
The general consensus is that they should be selling. In fact, the most positive broker around is Morgans, which has a hold rating on its shares at present. However, the broker has a price target of $19.40, which implies a potential downside of approximately 23% over the next 12 months.
Elsewhere, the team at Goldman Sachs sees even more downside risk for investors.
According to a note from this morning, the broker has retained its sell rating with an $18.10 price target. This suggests that Fortescue's shares could fall a whopping 28% from where they currently trade.
As well as being significantly overvalued compared to BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO), the broker has concerns over its decarbonisation plans. It explains:
The FMG site visit in October 2022 to the Pilbara & FY24 guidance highlighted ongoing elevated spend to maintain hematite group shipments at ~190Mtpa going forward. Combined with the ~US$7bn decarb program, we forecast FMG's capex will increase to ~US$3.9bn from FY25 (not including any unapproved green hydrogen/ammonia projects such as Norway, Kenya, Brazil).
We continue to think FMG is at an inflection point on capital allocation, and to fund the ambitious strategy, we assume the company reduces the dividend payout ratio from the current ~65% in 2H FY23 to ~50% from FY24 onwards (bottom end of the 50-80% guidance range), and increases gross gearing to >30% by FY27 (in-line with the company's target of 30-40%).
