Fortescue Ltd (ASX: FMG) shares have been on a bumpy ride in 2024. The mining company's share price is trading 26% lower this year to date and was swapping hands at $21.66 at Friday's close.
The company's recent announcement to simplify its structure and pivot away from green hydrogen has stirred discussions among investors and analysts alike.
Brokers also currently lack conviction on Fortescue. According to CommSec, the consensus of analyst estimates rates it a sell, and there are no buy ratings.
Let's delve into what the experts are saying about the future of Fortescue shares.
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Fortescue's green pivot — and back again
Around six years ago, Fortescue announced that it had big plans to 'go green', funding research into the possible development of green hydrogen and ammonia, respectively.
However, the company announced on Wednesday it will slash up to 700 jobs and downsize its hydrogen footprint as part of a restructuring effort. The miner is set to focus on generating renewable electricity instead, according to The Australian Financial Review.,
Going forward, it will combine its mining and energy divisions into one business rather than treat them as two separate entities.
The move comes amid growing realisation about the complexities and costs involved in producing green hydrogen.
Grattan Institute energy policy director Tony Wood highlighted the challenges to the AFR: "On the supply side, it is much more difficult and more expensive to do than many people were hoping it might be."
Wood noted issues in producing the fuel and finding customers willing to pay higher prices for a cleaner product, placing doubt on whether even a proposed $2 per kilogram subsidy would suffice to push projects forward.
The reality is that the queue of people being prepared to pay [Andrew] Twiggy Forrest a lot of money for green hydrogen is not very long.
Fortescue's green energy arm has also accumulated more than $2.1 billion in losses over the past four years, according to The Australian.
Broker ratings on Fortescue shares
MST Marquee analyst Saul Kavonic pulled no punches in comments on Fortescue shares:
This signals Fortescue Future Industries has failed… Fortescue persisted with its green hydrogen ambitions, spending hundreds of millions and lambasting critics, until now finally admitting defeat.
Meanwhile, UBS analysts optimistically said the "capital discipline implied in the narrowing and slowing of Fortescue's push into green hydrogen is welcome."
Macquarie analyst Rob Stein even increased his target price for Fortescue shares by 16% to $14.50. But the firm maintains an underperform rating.
According to separate reporting from The Australian, Stein said Macquarie expected renewed investor interest in Fortescue shares following the miner's decision.
Whilst we expect Fortescue to regain some interest from Australian institutional funds given its improved cash-flow profile post simplification, we believe valuation will be tested as the two-year-old H2 premium comes under pressure.
Foolish takeaway
Fortescue shares are in focus again after its latest updates concerning green hydrogen and renewable electricity.
Given how cyclical this company has been in the wake of its renewables push, it will be interesting to see how the market digests this news.
As always, remember to conduct your own due diligence before investing.
