Is Glencore a Buy?

Glencore is a Swiss mining company and commodities trader which is listed on the London Stock Exchange and is one of the largest constituents of the FTSE 100.

In this article, we will examine the question “is Glencore a buy” by taking a look at both the buy and sell cases for the mining stock. We will also highlight the Glencore dividend history and share the current Glencore share price forecast according to analysts.

Is Glencore a Buy or Sell?

There has been a fair amount of negative sentiment surrounding Glencore in 2024, resulting in the Glencore share price coming under pressure. However, it’s worth noting here that mining is a very cyclical industry, and we can observe similar share price patterns in industry heavyweights Rio Tinto and BHP Group in 2024.

Something which needs to be borne in mind when investing is that share prices don’t always go up. This is particularly true of cyclical stocks, especially miners which can be very sensitive to volatile commodity prices.

So, is Glencore buy or sell? In the following sections, we will analyse both the buy and sell cases for Glencore shares.

Sell

We will start by looking at the sell case for Glencore shares and address some of the negativity that has surrounded the stock.

At the beginning of August, Glencore released a disappointing set of half-year earnings. In the first six months of 2024, the company made a net loss of $233 million, compared to net income of $4.6 billion in the same period last year. This significant reversal occurred despite revenue rising 9% over the same period.

As well as this unfortunate slip into unprofitability, we have highlighted three potential issues facing Glencore shares in the future.

Coal

At the end of 2023, Glencore acquired 77% of the coal assets of Teck Resources, in a deal worth almost $7 billion.

The original plan was for Glencore to subsequently spin off its coal division into a new entity which would be listed in the US. However, this move was rejected by shareholders who wanted Glencore to retain the coal business.

Simply put, Glencore’s coal business is highly profitable. Many shareholders favoured keeping the division to enhance cash generating capacity in order to fund other opportunities and return excess cash to shareholders.

Actually, depending on your personal opinion, this could be in either the Glencore buy or sell column. However, the potential risk in retaining the heavily polluting coal business is that it could alienate environmentally conscious investors in the future, something which could add downward pressure to the share price.

Bribery Allegations

In August, Glencore agreed to pay $152 million to settle a Swiss bribery investigation. Although the miner did not admit to the findings of the Swiss Attorney General, it agreed to pay the fine in order to close the case.

This latest incident comes after previous cases in 2022, in which Glencore pleaded guilty to corruption and market manipulation in the US and the UK, admitting to paying bribes in several countries in order to win business. Consequently, Glencore paid more than $1 billion to settle the US cases and was ordered to pay £280 million in the UK.

As well as the financial cost to Glencore, such incidents damage a company’s reputation which can inflict lasting scars on share price and deter potential investors.

China

A further potential risk for Glencore comes in the form of the Chinese economy.

For more than two decades before the Covid-19 pandemic, China’s high rate of growth was accompanied by an insatiable demand for global commodities. This is something from which Glencore, amongst others, benefitted greatly.

However, since the pandemic, Chinese growth and, consequently, demand for commodities have both slowed. The Chinese economy does appear to be recovering, achieving its growth target of 5% last year and setting itself the same target in 2024. Nevertheless, if this recovery wavers, it could negatively impact Glencore.

Buy

We already noted that the nature of cyclical stocks means that, inevitably, there will be periods in which they underperform. The last 18 months have been such a period for Glencore. However, if we zoom out, the Glencore share price is up 77% over the last five years, comfortably outperforming the FTSE 100’s gain of 16% over the same time frame.

Clean Energy Transition

One of the potential long-term cases for buying Glencore shares can be found by looking at the commodities which the company produces.

Glencore is a major producer of copper, cobalt, nickel and zinc. These are all metals which could play a crucial role in the global transition to cleaner energy sources. As the world focuses on decarbonisation, we could see an uptick in demand for these commodities over the coming years, something which is likely to benefit Glencore.

However, it’s worth noting that the company’s credentials as a stock for the green energy transition have been somewhat hampered by the retention of its coal business.

Improving Debt Position

A bit of a red flag for Glencore recently has been its significant level of debt. However, the miner has begun to make good headway in reducing it in recent months. As of 30 June 2024, net debt stood at $3.6 billion, still rather high but considerably lower than the $4.9 billion of just six months before.

Interest Rates

High interest rates have been a double blow for companies like Glencore. Not only do higher rates mean higher interest expenses for Glencore’s high level of debt, but they have also contributed to restricted economic growth which can hamper demand for commodities.

Nevertheless, with inflation returning to target levels, further interest rate cuts are now on the cards, which are likely to benefit Glencore specifically and also improve sentiment amongst investors generally.

Glencore Dividend History

Glencore started paying dividends in 2011, the same year as its Initial Public Offering (IPO). Since then, it has paid dividends each year except for 2019, when its payout was suspended.

The chart below shows the Glencore dividend history each year since dividends were introduced.

Glencore Share Price Forecast

From the 12 analysts providing a Glencore stock forecast in the last three months, there are currently 9 Buy, 3 Hold and 0 Sell ratings for the stock. Of these analyst stock forecasts, the highest Glencore share price forecast was 600.00p and the lowest was 435.00p. The average Glencore share price forecast was 519.70p.

How to Buy Glencore Shares

With an investing account from Admiral Markets, you can buy Glencore shares and shares in thousands of other companies around the world. In order to invest in Glencore, follow these steps:

1. Open an Invest.MT5 account and log in to the Dashboard.
2. Open the web trading platform.
3. Search for Glencore stock and click the symbol to open a price chart.
4. Create a new order, enter the number of Glencore shares you with to purchase and click ‘Buy’.

Investing with Admiral Markets

With an Invest.MT5 account from Admiral Markets, you can buy shares in more than 4,500 stocks and over 200 Exchange-Traded Funds (ETFs). Click the banner below to find out more about investing with Admiral Markets:

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