Shares in Glencore (LON:GLEN) have climbed more than two percent in London in today’s session after analysts at Goldman Sachs turned bullish on the FTSE 100 group. The bank has pointed to the miner’s favourable commodities exposure despite prospects that the sector will remain choppy amid negative investor sentiment.
As of 10:11 GMT, Glencore’s share price had added 2.21 percent to 323.05p, outperforming the benchmark FTSE 100 index which has inched 0.21 percent higher to 7,373.65 points. The group’s shares rallied nearly 129 percent over the past year, and are up by some 16 percent in the year-to-date.
Goldman Sachs lifted its rating on Glencore from ‘neutral’ to ‘buy’ today with a price target of 390p, pointing to a positive commodity exposure, with about 50 percent of the group’s 2017 financial year earnings expected to come from copper and zinc, which the bank sees offering upside from their current spot prices. Goldman further noted that miners are attractive on spot as they are trading between two and three turns below their mid-cycle multiples. The analysts expect them to generate double digit cash flows for the 2017/18 financial year.
“Our view remains that even though commodity prices will be lower than spot – what’s important is the path they take,” Goldman Sachs pointed out, as quoted by Sharecast. “If prices taper slowly (which is our view) the significant free cash flow generation would likely see net debt fall – which means valuations even at lower commodity prices can be higher.”
HSBC is also upbeat on Glencore, having reiterated its ‘buy’ stance on the company today, valuing the shares at 435p. According to MarketBeat, the FTSE 100 commodities group currently has a consensus ‘hold’ rating and an average price target of 329.33p.