The Motley Fool

Can the Glencore share price keep climbing?

Image source: Getty Images

The Glencore (LSE:GLEN) share price has been on fire lately. After taking a massive hit in early 2020, the business has since been recovering. And over the last 12 months, the stock price is up more than 115%. In fact, it has risen so much that it is now trading firmly above its pre-pandemic levels.

But can it climb higher? And should I be adding this business to my portfolio?

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The rising Glencore share price

The mining industry was heavily impacted by Covid-19. National lockdowns led to many mining sites being temporarily shut down. And even today, there remains plenty that has yet to return to full operating capacity.

However, this lack of supply created a shortage in several commodities that has sent the prices of metals like copper and nickel surging. And Glencore is a leading provider of these, as well as many other metals.

Looking at the most recent report, the effects of Covid-19 are pretty clear. Top-line revenue fell by 34% as a result of reduced mining volumes. However, due to the previously mentioned rising commodity prices, underlying profits remained flat.

With mining volumes back on the rise and demand for precious metals still going up, Glencore and its share price look to me like they can continue growing in 2021 and beyond. The management team appears to think that, given the recent return of shareholder dividends.

Some risks to consider

Building and operating a mining site is an expensive endeavour with little room for cost-cutting. So the profitability of Glencore, as with other mining businesses, is ultimately determined by fluctuating commodity prices. This lack of pricing power adds considerable risk.

The recent increase in demand has been beneficial. However, if it falls or the supply becomes saturated, prices will once again drop, taking Glencore with it. This is actually why the company’s net income has never been particularly stable in comparison to its revenue.

Beyond this financial risk, the business also has to comply with regulations surrounding mining activity. These rules are put in place to protect the safety of workers as well as the environment. But, Glencore is an international business. It has to comply with different regulations across multiple countries. While I think it’s unlikely, suppose the firm were to breach any of these rules. In that case, it’s likely to suffer severe legal penalties and potentially lose the right to bid on new locations within the region.

The Glencore share price has its risks

The bottom line

Over the past couple of decades, Glencore has become one of the biggest resource businesses in the world. And it spent that time building up a diverse portfolio of assets.

With the world shifting towards green energy technology, I believe that the rising demand for precious metals won’t be slowing down in the near future. Combining this with Glencore’s proven business model makes me think that the share price can continue to rise. And therefore, I would consider adding it to my portfolio.

But there is also another stock I've spotted that looks like it has even more growth potential...

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Zaven Boyrazian does not own shares in Glencore. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.