Glencore Share Price Forecast November 2021 – Time to Buy GLEN Shares?

With a year-to-date gain of over 48%, Glencore (LON: GLEN) is among the best performing UK shares in 2021. The shares have lost 8% from their 52-week highs even as the drawdown is much lower as compared to other miners like BHP Billiton and Rio Tinto.

What’s the forecast for GLEN shares and can they continue their good run?

Glencore recent developments

Last week, Glencore released its third-quarter operating performance. Typically, big mining companies report their production reports quarterly and financial reports on a semi-annual basis. Glencore’s third-quarter operating performance was in line with the guidance. The global mining and trading giant reported own sourced copper production of 297.7 kt in the quarter which took its total production in the first nine months of the year to 895.5 kt. The company maintained its 2021 copper production guidance of 1.2 million metric tons at the midpoint. In the fiscal year 2020, the company had produced 1.25 million metric tons of copper.

GLEN third-quarter production report

Glencore’s zinc production in the third quarter was 274 kt. In the first nine months of the year, the company produced 855.8 kt of zinc. It expects to produce 1.17 million metric tons of zinc in 2021 at the midpoint. Earlier this month, Glencore had announced the sale of its Bolivian zinc assets to Canada’s Santa Cruz Silver Mining. GLEN would receive $20 million as the initial payment while the remaining would be spread across four years.

While some of the miners are shunning the fossil fuel business, Glencore continues to operate coal mines. The thermal coal market has been incredibly strong this year amid the uptick in global power demand. In its release, Glencore said that it is now recovering from the coal production cuts that were announced last year.

Marketing performance

Along with mining, Glencore also has a commodity trading and marketing business. The company expects the marketing business to have another record year in 2021 and is projecting adjusted EBIT above the long-term guidance range of $2.2-$3.2 billion.

Earlier this year, Gary 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.

Glencore is a green energy play

All these commodities 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, the company also has significant coal assets. This year, the coal business is expected to generate a third of GLEN’s adjusted EBITDA, thanks to the steep rise in coal prices.

Unlike other miners, Glencore has been reluctant to shed its coal assets. Meanwhile, a lot of institutional investors have been shying away from companies with fossil fuel businesses.

Glencore has a strong balance sheet

Glencore’s balance sheet looks quite strong. The company’s net debt was $10.6 billion at the end of June. Analysts expect the company to post an adjusted EBITDA of $21.5 billion in 2021. That’s a net debt-to-EBITDA multiple of just about 0.5x. Historically, Glencore has been quite aggressive with its capital allocation priorities. It is among the first miners to suspend dividends in cyclical downturns, and among the first ones to restore them back as well.

Now, with the strong balance sheet and high cash flow generation, GLEN would be spoilt for choices in its capital allocation priorities. While Glencore has been a growth-oriented company, making an acquisition at this point might not be prudent as mining assets are trading at elevated valuations. The company might instead find solace in dividends and share repurchases.

Glencore share price forecast

Of the seven analysts polled by TipRanks, six rate GLEN as a buy while one analyst has a hold rating. Its average target price of 423.33p is a premium of 15.9% over current prices. Meanwhile, the outlook for Glencore shares 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 of 5.9x. For mining companies, multiples bottom at the cyclical peaks in commodities. That said, the cyclical uptrend in commodity prices looks here to stay. Glencore is among the best ways to play the current uptick in commodities.

The shares are looking good on the charts also and should find support at the 50-day SMA (simple moving average). The shares also trade above the 100-day and 200-day SMA. The 14-day RSI (relative strength index) is 52.2, which is a neutral indicator.