Citi analysts renewed their coverage of Glencore (LON: GLEN) in a note this week, issuing the stock with a Buy rating and setting a target price of £5.30 per share.
The investment bank told investors it is optimistic about Glencore’s strategic mix of commodities, which they describe as a “winning combination” that positions the company for continued growth.
Citi highlights Glencore’s blend of “very cash-generative but considered ‘yesteryear’ commodities,” such as coal, and “future-facing” commodities like copper, zinc, and nickel.
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While the latter has had a “patchy cash-generation track record,” the combination of these two types of commodities is seen as providing both immediate cash flow and long-term growth potential to the company.
Furthermore, Citi believes the introduction of EVR coking coal to Glencore’s portfolio is a key growth driver.
Citi analysts note that this addition offers multiple advantages.
“It is one of the most interesting commodities in the medium term,” SAYS Citi, adding that it has synergies with Glencore’s dominant seaborne coking coal business, and the coking coal market is primed for a “roll-up play,” a strategy Glencore has successfully executed in other commodities.
Overall, Citi remains confident in Glencore’s ability to balance cash flow from established resources with strategic investments in commodities crucial to future technologies, suggesting this combination will continue to support a rise in the company’s share price.
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