Morgan Stanley upgrades Nexa Resources stock rating on zinc price outlook

Morgan Stanley has upgraded Nexa Resources' stock rating to Overweight from Equalweight and increased its price target to $14.20 from $13.50. The firm noted that the recent 6% drop in shares, despite a 5% rise in zinc prices and an 8% increase in copper prices, presents a compelling entry point. Commodity analysts at Morgan Stanley anticipate a 13% upside in zinc prices in Q1 2027 and a 5% increase by the end of 2027.

Such price forecasts could drive earnings per share up by 28% to 20% and the firm's 2027-2028 EBITDA estimates by 51% to 53%. The current valuation of Nexa is below its five-year averages, with a price-to-earnings ratio of 6.76 and an EV/EBITDA ratio of 1.5. This makes the stock undervalued, according to InvestingPro's Fair Value analysis.

The new price target suggests approximately 14% upside. Morgan Stanley also sees potential additional gains if Boliden acquires Nexa's minority shareholders at a 25% to 50% premium, which could push the share price to $16.50 to $19.80, implying a 33% to 59% upside. The stock is currently trading at a 6% discount to the terms of Boliden's future voluntary tender offer.

Nexa reported strong Q2 2026 results, with revenue at $907.9 million, exceeding expectations but earnings per share falling short at $0.52. Boliden AB has agreed to buy Votorantim's 64.68% stake in Nexa through an all-share transaction, valuing Nexa shares at $15.29. Scotiabank has raised its price target for Nexa to $15.00 while maintaining a Sector Perform rating.