Anglo American Platinum (JSE: AMS) has seen a mixed bag of news recently. Despite a strong rebound in March, the company’s share price has declined over 7.5% this week, following a year-to-date depreciation of over 14.9%. This weakness can be attributed to several factors, including a high P/E ratio compared to the broader South African market and declining earnings over the past year. Analysts are cautious about the company’s future profitability, with limited growth projections compared to the broader market.
However, there are also positive signs for Amplats. The company is undertaking cost-cutting measures and restructuring its operations to improve efficiency, particularly at its higher-cost Amandelbult complex. Additionally, the outlook for the platinum group metals (PGMs) market appears promising. Declining supply and resurgent demand, particularly for hydrogen applications, could lead to price increases in the medium term.
Technical Analysis
The daily chart shows that Amplats’ share price is currently trading slightly flat on Wednesday. Despite the recent decline, the share price remains above its key moving averages [50-SMA (blue line), 100-SMA (orange line), and 200-SMA (red line)], indicating a potential underlying bullish bias. The RSI (52.46) sits comfortably above the 50.00 level, further suggesting that the uptrend might still be intact.
On the upside, a sustained push higher could encounter initial resistance at the 99,991 cents level. A break above this point could see the price challenge the 120,515 cents resistance level in the short term. Conversely, a break below the moving averages would expose the initial support level at 77,726 cents. A significant decline breaching this level with high volume could confirm a bearish reversal, potentially targeting the 41,958 cents support level in the coming sessions.
Summary
Anglo-American Platinum’s outlook presents a complex picture. While the company faces challenges related to profitability and a high valuation, the potential for a rebound in the PGM market and ongoing cost-cutting measures offer reasons for optimism. Technically, the share price is at a crossroads, with a potential upside towards 99,991 cents and 120,515 cents or a downside towards 77,726 cents and 41,958 cents, depending on whether bulls or bears can take control.
Sources: TradingView, Trading Economics, Simply Wall Street, Mining Weekly, Dow Jones Newswire.
Piece written by Mfanafuthi Mhlongo, Trive Financial Market Analyst
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