Morgan Stanley initiated coverage of Rio Tinto’s American Depositary Receipts with an underweight rating on Tuesday, citing limited upside after a strong year-to-date rally in the stock.
The bank set a price target of $90 per ADR, implying more than 14% downside from the previous session’s close. The target is based on the prevailing exchange rate and reflects a valuation anchored to average enterprise-value-to-EBITDA and price-to-net-asset-value multiples.
The underweight call follows a downgrade of Rio Tinto’s London-listed shares to underweight from equal-weight on July 8, when Morgan Stanley also trimmed its London price target to £68.10 from £69.20. The firm had previously reduced the stock to equal-weight from overweight in late January, citing a diminished risk-reward profile as share prices approached historical averages.
Analysts attributed the cautious stance to several headwinds, including softening demand for iron ore, execution risks tied to large-scale project development, and potential industry consolidation that could face regulatory and governance constraints. The valuation framework applies a blended 8.9% weighted average cost of capital and assumes a 6.4x EV/EBITDA multiple for 2026–27 estimates, unchanged from prior assessments.
Rio Tinto’s ADRs last traded at $104.90, leaving the new target below current levels. The miner has not yet reported first-half earnings, which are expected to provide further insight into operational performance and capital allocation plans.
