UBS has noticed a change in sentiment among options market participants regarding palladium prices. Despite the recent increase in net long positions by non-commercial accounts, the outlook for palladium has turned negative. Changes in the market have led to a slight decline in prices compared to the position on March 11.
Options market sentiment has changed, with a current marginal bias to the downside. This is reflected in the cost of call and put options, which indicate the market’s assessment of risk. The risk reversal rate, which indicates the volatility differential between call and put options, ranges from 0 to -5.2% for the next one to six months.
UBS has forecast a modest surplus in the palladium market, projecting a glut of 50,000 ounces, or 0.5% of demand, this year. This surplus is expected to contribute to a downward trend in palladium prices, with a target of $900 per ounce by the end of 2024. The firm maintains a negative outlook on the future price of the metal.
The expected oversupply is attributed to declining demand for auto catalysts, which currently account for about 90% of palladium usage. UBS expects a 2% contraction in total demand in 2024.
In light of these factors, UBS advises that only investors with a high risk tolerance should consider palladium, citing low trading volumes and limited market size as further reasons for caution.
Third Party Advertisement. This is not an offer or recommendation by Investing.com. Consult the information here or
remove ads
.
Insights from InvestingPro
While UBS signals a bearish outlook for palladium, recent data from InvestingPro highlights the precarious financial health of companies in the sector. A major industry company is currently struggling with a difficult financial situation, as evidenced by its negative price-to-earnings (P/E) ratio of -5.95, which has further worsened over the past twelve months, starting from the third quarter of 2023, moving to -6.22. This indicates that investors are wary of the company’s profitability prospects.
Furthermore, the company’s return on assets (RoA) for the same period stands at an impressive -346.49%, suggesting that the company is not generating positive earnings from its assets. In line with broader market sentiment, the company’s 1-year Price Total Return as of April 14, 2024 fell -16.67%, reflecting lower investor confidence.
However, it’s not all bad. The company has seen notable EBITDA growth of 52.77% over the trailing twelve months as of Q3 2023, which indicates some operational improvements despite challenging market conditions. This could be a positive for investors looking for signs of a potential trend reversal.
InvestingPro Tips suggest investors should closely monitor the company’s next earnings on April 24, 2024 to gauge any changes in financial trajectory. Additionally, with InvestingPro’s Fair Value estimated at $0.05, significantly below analysts’ target of $0.35, investors may have an opportunity to reevaluate the company’s valuation.
Third Party Advertisement. This is not an offer or recommendation by Investing.com. Consult the information here or
remove ads
.
For those interested in a more in-depth analysis, InvestingPro offers 5 additional tips, providing a complete toolkit for making informed investment decisions. Use the coupon code PRONEWS24 to get an additional 10% discount on an annual or two-year subscription to Pro and Pro+, and unlock the full potential of InvestingPro analytics.
This article was generated and translated with the support of artificial intelligence and reviewed by an editor. For further information, please see our T&Cs.
Tags: UBS Sees Palladium Prices Fall Investing .com
