Freeport-McMoRan Plunges 3.0%: Can Fundamentals Justify the Freefall?

Summary
o Freeport-McMoRan (FCX) trades at £43.55, down 2.99% from its July 28 open of £44.56
o Intraday range of £42.21-£44.83 highlights 5% volatility amid mixed earnings reception
o Q2 2025 EBITDA of £3.2B and 10% copper sales growth contrast with a 37.1 P/E ratio 300% above 10-year average
o 50% U.S. copper tariff and £1.7B annual margin potential clash with analyst downgrades and short-term valuation skepticism
o Market awaits clarity on tariff execution and operational execution risks at Grasberg and Indonesian smelter
o Key resistance at £52.61 and support at £42.22 define near-term technical battleground

Fundamental Strength vs. Valuation Disconnect
FCX's 3% intraday decline defies its Q2 2025 earnings report, which showed £3.2B EBITDA, 10% copper sales growth, and £1.2B in operating cash flow. The stock's 37.1 P/E ratio--300% above its 10-year average--reflects a valuation disconnect as the market questions whether the company's current multiple can justify its operational momentum.

Despite a £1.7B annual margin tailwind from the 50% U.S. copper tariff and strategic investments in automation and leaching technology, FCX faces skepticism from Morgan Stanley [2] and UBS, which downgraded to 'Equal-Weight' and 'Neutral' in July 2025. The stock's price-to-book of 3.04 and EV/EBITDA of 7.75 suggest investors are paying a premium for growth potential, but this optimism clashes with a consensus 'Hold' rating and £58 price target. Copper Sector Volatility Amid Tariff Uncertainty
The copper sector remains in flux as U.S.

President Donald Trump's 50% tariff on copper imports--set to begin August 1--creates regulatory uncertainty. Rio Tinto [3] (RIO), the sector's leader, fell 1.36% on July 28, reflecting broader market caution. With the U.S. importing 500,000 tonnes of copper annually and only two primary smelters, the tariff's execution could disrupt supply chains and arbitrage dynamics. While FCX benefits from domestic production and the tariff, its valuation struggles highlight sector-wide hesitancy.

Ivanhoe Electric's Santa Cruz Project and NexMetals' Botswana ventures signal long-term supply expansion, but near-term demand-supply imbalances persist. Options Playbook: Hedging the Valuation Gap
o 200-day SMA: £40.63 (below current price)
o RSI: 48.80 (neutral)
o MACD: 0.76 (bullish divergence)
o Bollinger Bands: £43.13-£47.04 (current price near lower band)
o Short-term bullish trend with 52-week high at £52.61 as key resistance
o 50-day SMA at £42.22 and 200-day SMA at £37.81 define critical support
o High liquidity in options chain with 2025-08-01 expiry contracts
o FCX20250801P42 (Put Option):
- Code: FCX20250801P42
- Strike: £42
- Expiry: 2025-08-01
- IV: 43.29% (moderate)
- Delta: -0.2345 (moderate bearish exposure)
- Theta: -0.0029 (slow time decay)
- Gamma: 0.1393 (high sensitivity to price moves)
- Turnover: 27,220 (high liquidity)
- Leverage: 140.31% (aggressive downside potential)
- Payoff at 5% downside (41.37): £0.63/share
- Ideal for capitalizing on a breakdown below £42.22 support
o FCX20250801C43 (Call Option):
- Code: FCX20250801C43
- Strike: £43
- Expiry: 2025-08-01
- IV: 44.11% (moderate)
- Delta: 0.6008 (moderate bullish exposure)
- Theta: -0.2351 (rapid time decay)
- Gamma: 0.1719 (high sensitivity to price moves)
- Turnover: 45,567 (high liquidity)
- Leverage: 37.18% (balanced upside potential)
- Payoff at 5% downside (41.37): £1.63/share
- Strategic for a bullish breakout above £45.08 20-day SMA
o Aggressive bulls may consider FCX20250801C43 into a bounce above £45.08 20-day SMA Backtest Freeport-McMoRan Stock Performance
The backtest of FCX's performance after a -3% intraday plunge shows favorable short-to-medium-term gains.

The 3-day win rate is 50.15%, the 10-day win rate is 48.00%, and the 30-day win rate is 49.54%. While the returns are modest, with a maximum return of 2.90% over 30 days, the ETF has a tendency to recover and even exceed its pre-plunge levels. Critical Levels and Sector Signals: What to Watch Now
FCX's 3.0% intraday drop underscores a valuation impasse between operational strength and market skepticism.

The stock's 37.1 P/E ratio--300% above its 10-year average--requires a sustained breakout above £52.61 to validate its growth narrative, while a breakdown below £42.22 could trigger a reevaluation of its copper demand tailwinds. With the 50% U.S. tariff pending and short interest at 1.71% of float, investors must monitor the 52-week high and 50-day SMA as pivotal inflection points. Meanwhile, sector leader Rio Tinto (RIO) fell 1.36%, highlighting broader copper sector volatility.

Watch for a £52.61 breakout or a £42.22 breakdown to define FCX's near-term trajectory.

[1]

References

^ Freeport-McMoRan (www.ainvest.com)
^ Morgan Stanley (www.ainvest.com)
^ Rio Tinto (www.ainvest.com)