Glencore (LONDON:GLEN) is getting hammered yesterday as investors were getting out of this trade. The options market is still very heavy today and most of the bets are anchored towards the Put side. In terms of analyst rating we still have 16/32 analysts with a buy rating.
Most of the current price plunge is mainly due the concerns around the company debt issue and this is very much punishing the price action. Glencore has also announced that it is going to sell its Brazilain nickel project. The company in trying its best to reduce its debt by selling its assets as investors remain wary about the future prospects of the firm given the commodity prices are still plunging. But you cannot ignore the management’s action which is taking absolutely correct action to reduce its debt and we believe soon the commodity price stabilizes, the firm will be a value buy.
Analysts ratings have dropped due to ongoing debt problem which the firm is facing and that is once again on the back of falling commodity prices. If we do not see the demand picking up for commodities like copper and Aluminum– particularly in China, Glencore problems could become even more worse. However, if the firm does declare bankruptcy, it will certainly have ripple effects on other mining companies – although we do not think that will be the case. The firm still has valuable assets on its crown and it is only the matter of time before we see a bounce in the stock. Usually on a day like this, the next day there is a nice bounce and a similar pattern can be seen soon.
Above chart is just the summary since the firm did its IPO, other minerals have been performing poorly as well.
DISCLOSURE & DISCLAIMER: The above is for informational purposes only and NOT to be construed as specific trading advice. responsibility for trade decisions is solely with the reader.
by Naeem Aslam