Mineral Resources Ltd (ASX: MIN) shares have had more than a difficult start to the year and are down 52% since January.
Zooming out, the iron ore and lithium miner is down 80% in the past twelve months, settling at $14.40 apiece at market close on Wednesday.
Despite this, analysts have mixed views on the stock's outlook, with leading broker Macquarie rating the company a buy in a recent note to clients.
What does this mean for investors moving forward? Here's an overview of the company's situation and what the experts are seeing.
Why are Mineral Resources shares down?
Mineral Resources shares have suffered a severe beating in the past year. They have lagged the S&P/ASX 200 Index (ASX: XJO) – a proxy for the Australian share market – by a staggering 74% over this time and its own sector index by about 60%.
"MinRes", as it is often known, operates in the lithium and iron ore markets, which have experienced volatility in recent months.
Lithium prices have remained depressed since September last year, underlined by weak demand price performance across spodumene, lithium carbonate, and lithium hydroxide. These are the three major forms lithium is processed into.
Meanwhile, iron ore is down more than 4% this year, adding further strain to Mineral Resources shares.
According to Trading Economics, recent measures by the US Administration in setting global tariffs on trade partners have weighed in on the metal's pricing. It notes:
Even though a portion of the US tariffs exclude steel, and ferrous metal trade between the two countries is a small fraction of global flows, concerns that lower trade will pressure respective economies hampered the outlook for global iron ore buying.
For Mineral Resources, the impact of these price movements has been significant. It is a price taker on the commodities it sells, meaning it does not set the sales prices for lithium or iron ore – the market does.
And being a major player in the Aussie lithium and iron ore sectors, the drop in prices has rippled out to Mineral Resources shares.
Macquarie slaps a buy rating on MinRes
Interestingly enough, brokers have differing views on Mineral Resources shares.
Analysts at Macquarie are optimistic about the company's prospects, with the bank maintaining its buy rating and a price target of $35 per share, which suggests a potential upside of 140% at the time of writing.
It sees the current valuation of Mineral Resources shares as "attractive" in its critical minerals report posted this week.
On our base case forecast, all major lithium producers are trading below 0.6x P/NAV At spot prices,…while the multiple declines further to 0.5x for MIN. The attractive valuation reflects the market's concerns on MIN's Onslow haul road quality/capacity and group level governance overhang.
My colleague Bernd reported on the Onslow Iron haul road update last month.
Meanwhile, there are more cautious opinions regarding the stock. The consensus of analyst estimates has a hold rating, made up from eight buys, seven holds, and two brokers urging clients to sell the stock.
Goldman Sachs is one of the sell ratings. In its Australia Metals & Mining note released this week, the company downgraded its rating on the iron ore major.
Downgrade MIN to Sell (from Neutral) on valuation…high net debt and low FCF, and after downgrading EBITDA estimates after pushing out the Ashburton ramp-up and decreasing our near to medium term iron ore price forecasts. MIN continues to be highly geared, and we forecast net debt to further increase across FY25/26.
Time will tell what view turns out to be correct.
Foolish takeaway
Mineral Resources shares have been heavily sold this year, extending steep losses suffered over the past year.
The primary risks that investors need to consider are the volatility in commodity prices, particularly lithium, and iron ore. And while Macquarie remains optimistic about the potential for Mineral Resources shares, others caution that the company is in a challenging market.
As always, a long-term view is paramount in these scenarios, and it should be linked back to one's own financial goals and circumstances.
MinRes closed at $14.40 apiece yesterday, down another 12%.
