Why Has Glencore’s Share Price Been Falling In Recent Months?

Glencore's share price (LON: GLEN) has declined over the last 3 months, retracing from 52 week highs over 500p (506.72) to be trading a little over 400p. With the stock changing hands at 403.40 this morning, up 0.7%, the dip from recent highs remains close to 20%. So why has the renowned commodity giant on the FTSE 100 been pulling back?

In part, Glencore's shares have in recent years outperformed the index, gaining 70% over the last 5 years, against the FTSE 100's 16%. Then there is the element of dividend's struggling to keep pace with the rising share price.

The downturn can also be seen in the company's return on equity, which has seen a downturn, signaling challenges in profitability. However, the outlook is not bleak for Glencore. The company is expected to play a critical role in the green transition. It produces essential metals and minerals necessary for building renewable energy infrastructure and manufacturing electric vehicles, positioning it to potentially benefit from a surging demand in these sectors.

Dividend forecasts for Glencore paint a duller picture for yield-seeking investors than in the past, with projections falling from to 2.5% in 2024 and to 3.4% in 2025. This anticipated contraction in dividend yields may signal caution to income-focused shareholders, but has in large part been due to the increasing price of GLEN shares.

Yet, industry analysts hold a favourable outlook. They have set an average price target a little above 525p for Glencore’s shares, which is an encouraging 25% increase from the current trading price. This suggests a belief in the company's underlying value and the potential for recovery. Any consideration of Glencore should be made with a long-term perspective, taking into account the cyclical nature of commodity markets and the company's strategic positioning for future demands.

It is usually healthy in a stock's chart to see a period of retracement, support, and confirmation of each level upwards in order to have greater confidence in the long term path. This indicates that bulls continue to step in when there is an option for a ‘discount', but also that institutional investors are continuing to hold positions.

In recent days, Glencore has readjusted the terms of it's $625 million convertible bonds, as well as providing a $40 million loan facility for Cyprium Metals that should strengthen it's strategic partnership in it's Nifty copper mine in Australia.

Due diligence on the fundamentals should always be one of your first points of call when considering any new opportunity. We will be closely watching for signs of Glencore finding strong support at these levels.