Broker tips: Glencore, JD Sports, Miners

(Sharecast News) - Analysts at Citi reiterated their 'buy' recommendation (Target price: 700.0p) for shares of Glencore despite the fact that consensus longs often go wrong.

Despite increasingly being a preferred holding in the mining space for investors, in their opinion that was so for all the right reasons: the 'ESG redemption' narrative, "massive" earnings upside from coal prices and a strong environment for the company's marketing business and cash returns.

Indeed, on bottom up 'puts and takes' on earnings before interest, taxes, depreciation and amortisation and free-cash-flow suggested 20%/28% upside for 2022 in relation to the consensus and even more in 2023, they said.

They also cited the potential for potential cash returns of $20bn.

Analysts at Berenberg reiterated their 'buy' recommendation for shares of JD Sports, telling clients that investors' macro fears were overdone.

Indeed, they pointed out how the sports fashion retailer's "typically cautious" management team had recently raised guidance for a third time year-to-date.

"These fears look overdone, creating a compelling buying opportunity," they said.

But according to the analysts, JD Sports would need to deliver on three fronts: " prove its strength and resilience, announce a high calibre CEO and leverage its strong balance sheet to deliver on M&A opportunities."

The prize if successful could be a more than doubling in the share price, they said.

Even so, analysts Graham Renwick and Samuel Perry cut their target price for the shares from 285.0p to 200.0p, although they pointed out that still implied about 60% upside for the shares.

"JD Sports remains our top pick in consumer discretionary."

Jefferies upgraded its stance on shares of Anglo American, BHP and Rio Tinto on Tuesday and lifted its iron and coal price forecasts as it took a look at the mining sector, arguing that it was undervalued and poised to recover.

We had expected a demand soft patch to lead to a period of lower commodity prices, with a shift in policy needed to spark a gradual recovery in Chinese demand," the bank said. "That shift is arguably here. While macro risks are clearly elevated and mining shares should be volatile, the sector is undervalued and poised to outperform as China recovers."

Jefferies lifted Anglo American, BHP and Rio Tinto to 'buy' from 'hold'. It lifted its price targets for the stocks to 4,500p from 3,800p, to 3,100p from 2,750p, and to 6,800p from 6,700p, respectively.

The bank said Chinese demand has recently been very weak due to the "catastrophic" impact of Covid lockdowns and a collapse in the country's property markets. However, it also noted recent evidence of a shift in policy that indicates the government has become increasingly focused on the economy.

"Stimulus is being rolled out in steps and Covid lockdowns are reportedly being relaxed (although more lockdowns may happen in response to Covid flare-ups)," it said.

"We are cautiously optimistic that a slow recovery in Chinese demand is coming, and this should partly offset weaker demand elsewhere. We also recognise that the demand environment is still very risky, and mining shares will likely be volatile as a result.

"Eventually, we should be in an environment of a synchronised recovery in global demand, with commodity prices rising to new highs in some cases. This cycle will take a decade to play out, in our view, and continues to be underappreciated."