morningstar fair value

Apologies if this has been posted elsewhere. As an eTrade user, I get the morningstar and have been looking at a SELL recommendation for what seems like years now, with a price target below $3. So it was with great interest that i read this....


We're placing our fair value estimate for Fortescue under review, with the likelihood that we'll raise it shortly. While the precise magnitude of the fair value estimate increase is uncertain, we think such increase will be material. Fortescue has benefited from a number of recent positive changes in its business environment, including the high iron ore price, the continued availability and extension of cheap credit, the near-completion of major expansionary works, and the commissioning of expanded capacity. Collectively, these positive changes may see our cost of equity decline to 13% from its current 15%, reflecting our assessment of the shift in systematic risk to above average, from very high. Fortescue's fair value estimate is highly sensitive to changes in our assumed weighted average cost of capital. We are also reviewing Fortescue's long term margins and capital investment requirements relative to the industry.