Glencore Stock Price Forecast February 2022 – Time to Buy GLEN.L Stock?

Glencore stock (GLEN.L) stock hit a new 52-week high today as markets gave a thumbs up to its 2021 earnings. While other big UK miners have come off their peaks, Glencore has looked strong.

Glencore was among the best performing London stocks in 2021 also as metal and mining names saw upwards price action amid the continued economic recovery. What’s the forecast for GLEN stock in 2022 and is it a good buy in February?

Glencore recent developments

Glencore released its full-year 2021 earnings today. Typically, big mining companies report their production reports quarterly and financial reports on a semi-annual basis. In 2021, Glencore’s revenues increased 43% to $203.7 billion. For mining companies, revenues are a function of shipments and commodity prices. GLEN’s 2021 production wasn’t much different from its 2020 production. The increase in revenues was primarily driven by higher metal prices. All the commodities that Glencore produces, especially coal, were quite strong in 2021.

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GLEN reported a steep rise in profits in 2021

GLEN’s adjusted EBITDA increased 84% to $21.3 billion in 2021. Commenting on the earnings, Glencore’s CEO Gary Nagle said “Against the strong commodity backdrop, and leveraging the unique combination of our transition and energy commodities, along with the global reach and scale of our marketing business, the Group delivered an 84% increase in Adjusted EBITDA to $21.3 billion.”

He added, “Marketing delivered another robust performance, with Adjusted EBIT up by 11% to $3.7 billion, while multi-year or record high prices for many of our commodities, underpinned the 118% jump in Industrial Adjusted EBITDA to $17.1 billion. Net income attributable to equity holders was $5.0 billion.

Nagle became the CEO in 2021

Last year, Nagle took over as GLEN’s CEO from Ivan Glasenberg. Under Glasenberg, Glencore positioned itself as a mining company that’s positioned to capture the demand trends from the green economy. The company is the leading cobalt miner and controls a third of the market. It is also the leading zinc producer and among the largest copper producer.

While several diversified miners have been disposing of their coal assets, Glencore has been reluctant to shed its coal assets. The strategy paid off well in 2021 as the global coal shortage propped up prices and helped lift Glencore’s earnings.

Talking about its climate strategy, it said in its earnings release that “Responsible decline of our coal portfolio will help meet critical regional energy needs and affordability as decarbonisation pathways will be non-linear across time and geography.”

Glencore’s debt has come down

Thanks to the steep rise in earnings, Glencore’s debt has also come down. It had a net debt of $6 billion at the end of 2021 which is a fraction of its adjusted EBITDA in the year. GLEN’s net debt came down by $4.6 billion in the second half of 2021. The company’s balance sheet looks quite strong and it has announced a shareholder payout of $4 billion which includes a $3.4 billion dividend and a $550 million share buyback plan.

GLEN sets aside $1.5 billion

Glencore also set aside $1.5 billion for a US State Department investigation for money laundering. It termed the figure as the “current best estimate of the costs to resolve these investigations.”

It added, “While Glencore cannot forecast with certainty the cost, extent, timing or terms of the outcomes of the investigations, the company presently expects to resolve the US, UK and Brazilian investigations in 2022.”

RBC Capital Markets was estimating that the probe would cost GLEN around $3 billion. “We believe that with the main investigations quantified this will likely de-risk the company from this “unknown known” which has been an overhang for the company since 2018,” said RBC Capital Markets analyst Tyler Broda

Glencore is a green energy play

The commodities that Glencore produces are in high demand, thanks to the green energy transformation. The copper intensity in electric cars and renewable energy is higher than ICE (internal combustion engine) cars and non-renewable energy generation respectively. However, while its portfolio should have made it a top choice for ESG investors, many institutional investors have been shy of the company due to its coal portfolio.

While other big miners like BHP Billiton and Rio Tinto are smarting from the crash in iron ore which led to a sharp fall in their earnings in the second half of 2021, GLEN benefited from strong copper prices.

GLEN stock price forecast

Of the 11 analysts polled by TipRanks, 10 rate GLEN as a buy while one analyst has a hold rating. Its average target price of 450.91p is a premium of 5.6% over current prices. Meanwhile, the outlook for Glencore stock depends on the commodity price environment. Copper has rebounded from its lows. It is also among the metals where most analysts have a bullish long-term forecast.

Currently, GLEN shares trade at an NTM (next-12 months) EV-to-sales multiple of 4.5x which is below the five-year average. For mining companies, multiples bottom at the cyclical peaks in commodities.

Should you buy Glencore stock?

Glencore stock is looking bullish on the charts and is trading above all key moving averages. The stock is a play on copper and zinc, whose long-term demand environment looks strong. However, in the short term, noise over China’s slowdown, which is the biggest consumer of most metals including copper is a risk for GLEN investors.

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