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Despite a weak start to 2025 for the Glencore (LSE:GLEN) share price, the mining giant’s become the talk of the town. It seems management’s getting impatient with London investors undervaluing its business. As such, Glencore might be the latest company leaving the London Stock Exchange to relist elsewhere, most likely in New York.
But putting the potential departure aside, the group’s latest earnings reports seem to have failed to invigorate investor appetite. And to be fair, it was a bit of a mixed bag. However, digging deeper, there are some encouraging trends in the group’s underlying performance. With all this in mind, where could Glencore’s share price be 12 months from now?
Copper production to increase
Copper is a critical material in modern technologies, from renewable energy infrastructure to electric vehicles. As such, demand for the red metal is expected to rise considerably over the coming years. To capitalise on this trend, management’s aiming to expand its copper production to one million tonnes by 2028.
However, management’s been hesitant to pull the trigger until copper prices rise higher to make an increase in capacity worthwhile. In the words of CEO Gary Nagle: “We will wait until the market is ripe and ready”.
Nevertheless, the performance of its metal mining activities in 2024 was still fairly strong. Underlying earnings before interest and taxes (EBIT) came in at $2,375m – a 39% increase compared to 2023, thanks to higher prices and production volumes.
Sadly, this progress was adversely offset by far weaker coal production and prices. In fact, the group’s energy and steelmaking coal business saw underlying earnings shrink by 47% year-on-year to $908m. The end result was Glencore’s total adjusted EBIT falling by 7.5%, from $3.45bn to $3.19bn.
Is Glencore too cheap?
Seeing the Glencore share price tumble on the back of these latest results is understandable. However, when compared to its peers, there’s some evidence that Glencore shares are being underappreciated.
Looking at the underlying enterprise multiple, or Enterprise Value-to-EBITDA, the stock currently trades at around 4.9. By comparison, most of its rivals sit close to an underlying EV/EBITDA of 6.
Assuming the stock’s able to rise to the industry average, that implies a minimum 22% boost. And it would certainly help partially explain why the average analyst forecast currently expects Glencore’s share price to reach 447.09p by this time next year – a 40% increase.
Is this likely to happen? I remain sceptical. Mining’s a notoriously cyclical and risky enterprise. It’s possible that a rebound in coal, along with the continued increase in copper prices, could help Glencore’s earnings surge. But that’s dependent on supply and demand dynamics, which are difficult to anticipate.
And since the appetite for risk among British investors is seemingly quite weak, Glencore isn’t a stock I’m rushing to buy right now despite the optimistic outlook from institutional analysts.
