Glencore’s (LSE: GLEN) share price has tanked recently. Currently, the shares are trading about 40% off their highs and at levels last seen in September 2021.
Is now the time to consider buying this FTSE 100 stock? Let’s discuss.
A play on copper
In theory, Glencore has an attractive long-term outlook. That’s because it’s a major producer of copper.
In the years and decades ahead, copper demand is forecast to increase significantly. The global shift to clean energy, an increase in the number of electric vehicles (EVs) on the road, and an increase in data centres are expected to be some of the key growth drivers.
The EV boom, in particular, is worth highlighting. Whereas a traditional vehicle uses around 20-25 kilograms of copper, an EV uses about 80-85 kilograms so demand here is likely to be high.
Data centre demand also looks like it will grow substantially. According to BHP, the amount of copper used in data centres is set to grow six-fold by 2050.
Unpredictable earnings
The problem with Glencore from an investment perspective, however, is that it’s very unpredictable. With this company (which produces a range of commodities including nickel, zinc, and coal), there’s no guarantee of revenue and profit growth (which is what drives a company’s share price higher in the long run) due to the fact that commodity prices tend to swing around wildly.
This was illustrated earlier this week when the company posted its full-year results for 2024. Due to weak coal prices and impairment charges, the numbers were poor.
For the year, adjusted earnings before interest and tax (EBIT) came in at $6.9bn – down a whopping 33% year on year. Meanwhile, the group posted a net loss of $1.6bn versus a profit of $4.3bn a year earlier.
Trading uncertainty
One other issue to be aware of with Glencore is that it’s not just a commodity producer. It also engages in commodity trading, like an investment bank or hedge fund.
This adds another layer of uncertainty for investors. Even if commodity prices were to rise, there are no guarantees that the stock would do well because the company could experience trading losses.
It’s worth noting here that over the last year, the price of copper has risen nearly 20%. Yet over this timeframe, Glencore’s share price is down about 16%.
Dividend income?
What about dividends though? Could the stock be a good play for income?
Well, for 2025, the company is expected to pay out 21.8 cents per share to investors. That translates to a yield of around 4.9% right now.
However, I’d take this forecast with a pinch of salt. Glencore’s payout tends to fluctuate heavily from year to year because its earnings fluctuate, and in recent years, the company has slashed its payout heavily on several occasions.
Better stocks to buy?
Now, of course, there’s a chance that Glencore shares could do well in the years ahead. In the past, there have been times where the share price has surged.
However, for me, they’re too unpredictable. I think there are better shares to consider buying.
