Morgan Stanley has upgraded Glencore PLC (LSE:GLEN) to 'overweight', saying the market has overreacted to concerns about weaker coal prices and potential pressure on its trading business.
The bank believes these fears are exaggerated and that Glencore now presents an attractive buying opportunity. Its target of 470p represents a 32% premium to the current share price of 355p.
In a note, Morgan Stanley highlights that Glencore’s share price has underperformed both its sector and the commodities it produces, largely due to worries over falling coal prices and a possible decline in trading profits.
However, it argues that the company has a strong track record of adjusting production and managing costs in response to price swings.
On the trading side, the Wall Street bank sees no signs of a slowdown, stating that price volatility remains high, and disruptions in global supply chains continue to create opportunities.
It believes Glencore is well-positioned to maintain strong earnings despite concerns over a potential end to the war in Ukraine affecting commodity markets. And it sees Glencore as offering a compelling “risk-reward asymmetry” and has made it one of its top picks.