The Fortescue Ltd (ASX: FMG) share price has been one of the worst performers in the S&P/ASX 200 Index (ASX: XJO) this year, down by 37%. The ASX 200 has risen by 2.4% this year, so there has been significant underperformance.
However, after such a major decline, investors may wonder whether to cut their losses or see this as a buying opportunity.
It's clear that the iron ore price crunch contributed significantly to the decline in the Fortescue share price. The commodity price has fallen from above US$140 per tonne to almost US$100 per tonne today.
Cyclical declines could lead to opportunities for brave investors, but this may also represent a good enough price to exit. Let's look at what two experts with opposing views think.
Time to buy Fortescue shares?
Writing on The Bull, Jabin Hallihan from Auburn Capital calls the ASX iron ore share a buy.
Hallihan noted that the company delivered record iron ore shipments of 53.7 million tonnes in the fourth quarter of FY24, which was 10% higher than the prior corresponding period. This led to total shipments for the year of 191.6 million tonnes.
In FY25, Fortescue is guiding for total shipments of between 190 million tonnes and 200 million tonnes.
The expert's final thoughts on the business referenced the large decline as the key reason for its attractiveness:
The shares have significantly fallen to trade at a discount, in my view.
The ASX iron ore share could fall further
John Edwards from Novus Capital has quite a different view on the mining business.
Novus Capital believes Fortescue shares are "still trading at a premium" to the more diversified miners of Rio Tinto Ltd (ASX: RIO) and BHP Group Ltd (ASX: BHP).
What is Edwards concerned about the ASX iron ore share? He said:
We're concerned about Fortescue's lower grade iron ore. A focus on decarbonisation is resulting in a preference for higher grade ore. Our 12-month price target is $17.
A price target is where analysts think the share price will be in 12 months from the time of the investment call. It's just a forecast, though; the expert doesn't have a crystal ball telling them what's going to happen.
Novus Capital's price target of $17 suggests that the Fortescue share price could decline by around 8% from its current level.
Foolish takeaway
The Fortescue share price has dropped 17% since I sold nearly all of my Fortescue shares last month.
Fortescue may be at a premium to the other iron ore miners, but it can also be an appealing price.
When the iron ore price falls below US$100 per tonne, I get excited by the iron ore sector as a contrarian opportunity. The lower prices go, the more likely good returns could be unlocked for prospective investors. It can also boost the prospective dividend yield.
I don't think it's a great price yet, but it's close to being a buy in my mind.
