On Tuesday, Berenberg initiated coverage on Glencore Plc (OTC:GLNCY) (GLEN:LN), a diversified miner and commodities marketer, with a Buy rating and a price target of GBp3.80. The new price target suggests a 21% upside potential for the company’s shares. Berenberg’s analysts believe that although Glencore (LON:GLEN)’s shares have underperformed compared to its peers since 2023, the current valuation presents an attractive investment opportunity.
Glencore’s lag in share performance has been attributed to its significant role as a thermal coal producer, which is not considered a pure play in the energy transition market. Additionally, the company’s past issues with governance have also negatively impacted investor sentiment. Despite these challenges, Berenberg sees Glencore’s valuation at 0.84 times Net Asset Value (NAV) and 3.4 times EBITDA as compelling reasons for their positive outlook.
The coverage note stated that Glencore has various self-help options available to create shareholder value and improve its stock rating. This includes the potential to drive a rerate without relocating its primary listing from London, which the company has considered. Berenberg emphasizes the importance of Glencore’s management effectively executing their strategy to realize this rerate.
The analyst pointed out that addressing governance issues is essential for improving market sentiment toward Glencore. The company has indicated that it is working towards resolving these concerns, which could further contribute to a positive rerating of the stock.
Glencore’s position in facilitating the energy transition, despite the overhang of thermal coal production, is acknowledged as a factor in the company’s favor. Berenberg’s initiation of coverage on Glencore with a Buy rating and a GBp380 price target reflects their belief in the company’s potential to overcome its current challenges and deliver value to its shareholders.
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