The Fortescue Ltd (ASX: FMG) share price has suffered significant volatility since the end of August. Within the last two months, it has been below $16 and above $20.
Investors were very pessimistic about the Chinese economy and received a sugar hit when China announced it was going to provide financial stimulus in various ways, including by lowering interest rates for borrowers and reserve requirements for banks.
However, the market was hoping for additional support measures to be announced, which didn't happen. That's why, in my view, the Fortescue share price has dropped 7% since 30 September 2024.
After all that excitement, where could the Fortescue share price go next? Some experts have shared their view.
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Negative commentary on the ASX mining share
Following the Fortescue quarterly update, UBS said that its operational performance "missed expectations" despite record quarterly shipments and unchanged FY25 guidance.
The broker noted that adverse weather impacted Fortescue, while realised prices were weaker than expected because of "surplus concentrate supply in China and tight steel mill margins seeing mill prefer low cost (low grade) iron ore." However, this has started to reverse early in the December quarter.
In terms of the outlook and catalysts, UBS says China's policy remains "key", with more support expected. However, the broker does not expect a "large, steel-intensive stimulus".
UBS is forecasting the iron price per tonne to be US$100 in 2025, US$95 in 2026 and US$90 in 2027.
The broker attaches a lot of "significance" to the FY25 second quarter to determine if FY25 guidance can be met because of the "lower production, higher strip and higher cost" the broker is currently seeing from Fortescue.
UBS will also be looking at the realised sale price for Iron Bridge iron ore because of recent weakness.
Finally, the broker believes energy final investment decisions (FIDs) are unlikely on major projects until the "appropriate policy settings are in place."
Fortescue shares rating
UBS currently has a sell rating on Fortescue shares with expectations that Fortescue's net profit is going to drop significantly in FY25 to $3.7 billion. This would see earnings per share (EPS) decline to just $1.20, and the dividend per share could more than halve to 86 cents per share.
The broker has a price target on Fortescue shares of $17.60. A price target is where the broker thinks the share price will be in 12 months from the time of the rating.
UBS is implying that the Fortescue share price could fall by 8% over the next year. That would not be ideal, considering it has already dropped more than 30% in 2024.
