Sooner or later, the massive sell off on global markets will make for grand opportunities for those willing to take the plunge. For Methanex Corp. (MEOH) investors, that time is now, according to Raymond James analyst Steve Hansen.
Mr. Hansen said in a research note:
With Methanex down more than 50% from its June highs, the company has become mispriced, in our view. We encourage investors to opportunistically accumulate shares of Methanex.
The analyst told clients that he believes Methanex can weather current economic conditions due to several factors, including the gradual roll-off of fixed price contracts, strong free cash flow generation, a continued share buy back plan and a healthy 4.2% dividend.
Mr. Hansen upgraded Methanex stock from "market perform" to "outperform," but also lowered his price target from $26.50 to $18, due to some lingering concerns about the macro-environment and also his revised price forecast for methanol prices and revised earnings outlook.
He now predicts methanol prices to average $560 per metric ton in 2008 and only $285 per metric ton in 2009. As a result, Methanex will produce earnings per share this year of $2.47, down from his previous estimate of $2.62, and earnings of $2.25 per share in 2009.