There have been many interesting comments of late concerning brokers rerating ORE. The Cannacord price target of 5.80 was certainly worthy of note, and then the mentions of Deutsche Bank and Macquarie. Lots of improving sentiment it seems, but there is always some risk of cherry picking amongst forecasts. So off I go to FT.com to check consensus data from 8 brokers
https://markets.ft.com/data/equities/tearsheet/forecasts?s=ORE:ASX
"As of Oct 28, 2016, the consensus forecast amongst 8 polled investment analysts covering Orocobre Limited advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on May 08, 2016. The previous consensus forecast advised investors to hold their position in Orocobre Limited."
"The 8 analysts offering 12 month price targets for Orocobre Limited have a median target of 4.71, with a high estimate of 5.80 and a low estimate of 2.22. The median estimate represents a 30.50% increase from the last price of 3.61."
Given that just one broker is recommending sell and the other seven are at hold(1), outperform(3) or buy(3), that 2.22 low estimate is looking a very lonely outlier. A median target of 4.71 is pretty attractive from here…
That then got me thinking about the shorts. It would be interesting to know what caught the attention of the shorters that closed out. Was it the improving sentiment? Was it the numbers in the quarterly? Or was it the observation that a significant portion of the short sales had been bought up by the tight hands of the top 20 holders? If you have ever wondered who lends their shares to shorters, this would be one place to look… it must be tempting to lend stock knowing that you will get to accumulate more at giveaway prices and that the price dip will only be short term…
Now that the ASIC aggregate short data has caught up with the action, we can see that the little run from 3.18 to 3.83 was triggered by just the smallest movement in aggregate shorts – a reduction from 7.70% to 7.35%, or 980,029 shares.
If we look at the 12 month shorts vs price history of ORE, the last peak of short selling saw the aggregate short position at 6.56% back in January. It took six months to drop back to less than 0.5% and during this period we saw the share price go from around $2.50 to $5.00. Admittedly, this run felt the tail wind of the general lithium boom but it was tempered by ongoing concerns about the ramp up. The next run will be all about ORE and expectations of cash flow growth and expansion plans. I am not particularly in to TA but I am expecting the next upswing to see the winding back of shorts contribute some real momentum to the movement. Maybe we might see a decent overshoot of that 4.71 median target...
