Own Rio Tinto (ASX:RIO) shares? Jefferies says they'll outperform 'in the near term'

Own Rio Tinto shares? You might be interested in what Jefferies just had to say about the company and the price of iron ore.

| More on:
miner giving 'ok' sign in front of mine

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key Points

  • Rio Tinto shares are now trading at 3-month highs
  • The price of iron ore made a reversal in late 2021 and is also back above its 3-month highs
  • Analysts at Jefferies reckon the Rio Tinto share price and iron ore can continue outperforming in the short-term

Shares in Rio Tinto Limited (ASX: RIO) have reclaimed territory after bottoming in November and are now trading at 3-month highs.

At market close on Thursday, shares in the mining and resources giant are fetching for $111.70 apiece after spiking 4.13% on the day.

It was a fairly lacklustre year for Rio in 2021, with shares walking sideways the majority of the year – but not without the fair share of volatility.

Then in August, after peaking at a record high of $134.40, the floor fell out of iron ore markets and the impulse saw Rio get chewed up all the way down to its 52-week low of $87.51.

Now that shares have regained momentum, analysts at investment bank Jefferies have chimed in on the investment debate.

Near-term bullish, but retains 'hold' rating

The firm notes that the support underneath Rio's share price is largely assigned to renewed strength in the iron ore markets that's been in situ since November last year.

After racing down from its peak, the price of iron ore itself bottomed in late November and has since made a reversal back above its 3-month highs.

It is now trading at US$126.50/tonne, having shot up 50% from its low in 2021.

Aside from that, the broker reckons that Rio could be the beneficiary of rival BHP Group Ltd (ASX: BHP)'s planned exit from the Financial Times Stock Exchange (FTSE).

Each of these short-term catalysts could bode in well for the Rio share price, Jefferies says, but not necessarily over an extended horizon.

"We prefer pure-play copper and aluminium producers over iron-ore miners" Jefferies notes, showing its current philosophy on ASX resources shares.

"But we do believe iron ore and Rio can continue to outperform in the near term".

Even still, it rates the stock a 'hold' and values the company at $100 per share.

What about other brokers?

Goldman Sachs is bullish on the company and has it as a buy on a $125.60 valuation, whereas Morgan Stanley tips Rio to outperform as well.

Meanwhile, Macquarie and Credit Suisse also reckon that Rio is set to outperform this year on the back of a more buoyant iron ore market.

In fact, in a list of analysts provided by Bloomberg Intelligence, the sentiment appears to be fairly evenly split for the ratio of buy to holds.

For instance, 47.1% have Rio as a buy whereas 41.2% have it as a hold according to that list. Only two firms recommend Rio sell their Shares.

There is a 132% spread in price targets in this analyst group with Evans and Partners and Macquarie Group most constructive at $146 and $133 respectively.

In the last 12 months, Rio Tinto shares have slipped more than 7% in the red. However, it is up almost 17% in the past month after rallying 12% since January 1.

The author has no positions in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Broker Notes

two men smiling with a laptop in front of them, symbolising a rising share price.
Broker Notes

These ASX 200 shares could rise 25% to 60%

Analysts think these shares are top buys and could rise materially.

Read more »

A happy young couple lie on a wooden deck using a skateboard for a pillow.
Broker Notes

Bell Potter says this growing ASX 200 stock can rise over 40%

Big returns could be on the cards for buyers of this stock.

Read more »

Broker written in white with a man drawing a yellow underline.
Broker Notes

Brokers name 3 ASX shares to buy today

Here's why brokers are feeling bullish about these three shares this week.

Read more »

Man with rocket wings which have flames coming out of them.
Resources Shares

Up 23% today, why Macquarie forecasts this ASX 200 mining stock could rocket another 33%

Macquarie forecasts more outsized gains to come for this surging ASX 200 mining stock.

Read more »

A man sits in deep thought with a pen held to his lips as he ponders his computer screen with a laptop open next to him on his desk in a home office environment.
Bank Shares

ASX banking sector: Is it time to consider a regional bank?

The big 4 banks are widely considered to be overvalued.

Read more »

A share market analyst looks at his computer screen in front of him showing ASX share price movements
Broker Notes

'Materially undervalued': Brokers name 3 ASX shares ripe for investment

Looking for some FY26 investment inspiration?

Read more »

Happy friends at a party enjoying pizza, symbolising the Domino's share price.
Broker Notes

Buy, hold, or sell Domino's Pizza shares after shock CEO exit? Here's what the experts say

The Domino's share price has been recovering after losing a quarter of its value last Wednesday.

Read more »

Three miners looking at a tablet.
Broker Notes

Does Macquarie prefer Rio Tinto, Fortescue or BHP shares heading into 2026?

BHP, Rio Tinto, or Fortescue? Macquarie only expects one of the three ASX mining stocks to outperform.

Read more »