Intrepid Pops 36% On Higher Potash Prices; Street Sees 55% Downside

Shares of Intrepid Potash jumped 36.1% on Thursday after the fertilizer manufacturer reported a significant rise in prices for potash and its Trio specialty fertilizer in the agricultural markets.

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Intrepid (IPI) said that after a $20 per ton increase in December, the Trio price rose by $60 per ton in agricultural markets, up 27% above the 2020 summer pricing.

Meanwhile, potash prices increased by $90 per ton in agricultural markets, reflecting 31% growth from 2020 summer pricing. The $90 per ton increase includes a $40 per ton growth in December.

“Good weather and compelling fertilizer economics have spurred strong early season demand for potash and Trio in our domestic markets”, said Intrepid CEO Bob Jornayvaz. “A strong agricultural commodity environment across a wide range of crops that includes corn, soybeans, wheat, cotton, coffee and sugar, combined with a reduced potash supply has driven the improvements in the fertilizer market in recent weeks.” (See IPI stock analysis on TipRanks)

Additionally, the company announced that the “oilfield outlook continues to improve in the Northern Delaware Basin driven by an increase in drilling and fracking activity. Intrepid currently forecasts first quarter 2021 and full year 2021 water volumes in excess of same time last year in the Intrepid and NGL Energy Partners (NGL) three-ranch area of mutual interest (AMI).”

On Nov. 4, Roth Capital analyst Matthew Farwell initiated coverage on Intrepid with a Buy rating and price target of $11 (54.5% downside potential). In a note to investors, Farwell said that a weak second-half 2020 is already factored into the company’s shares.

However, the analyst believes that Intrepid has favorable exposure to long-term agricultural fundamentals and expects the company’s oilfield solutions to generate steady cash flows.

Overall, consensus among analysts is a Moderate Buy. The average price target stands at $10.75 and implies downside potential of about 55.5% to current levels. In 2020, shares of IPI have depreciated by 10.9%.