Coal producer Core Natural Resources (NYSE: CNR) had a banner Wednesday on the stock exchange, rising by more than 6% across that day’s trading session. The market was a reaction to an analyst’s initiation of coverage on the stock, and his bullish evaluation of its prospects. Core’s stock gain was in marked contrast to the S&P 500‘s (SNPINDEX: ^GSPC) trajectory; the index slipped by 0.3% Wednesday.
Inaugurated with a buy
The initiating party was Swiss bank UBS, in the person of analyst Myles Allsop. Before market open that day, Allsop launched his Core stock coverage with a buy recommendation and a price target of $80 per share. That anticipates upside of almost 12% on the stock’s current level.
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The UBS pundit considers Core to be a relatively high-quality miner with an admirable degree of diversification in its business, according to reports. He also expressed admiration about what he considers to be the company’s robust balance sheet (chiefly, its $38 million net cash position) and a good pricing model.
Allsop also pointed to Core’s ability to generate over $500 million in free cash flow (FCF), which, among other items, allows management to support the stock with a generous, $1 billion share buyback program.
Some observers are more bullish than others
I’d agree with the analyst that Core has numerous positive factors going for it. However, despite the resurgent popularity these days of traditional energy sources, the world will more likely trend away from them and continue to embrace greener solutions. I’m not sure if I’d be so bullish on Core’s potential.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
