Broker tips: Arrow Exploration, Glencore
By Iain Gilbert
Date: Thursday 01 May 2025
(Sharecast News) - Analysts at Canaccord Genuity lowered their target price on Arrow Exploration from 32.0p to 28.0p on Thursday as it took a "more cautious approach" to the firm's production profile.
Canaccord Genuity said FY24 was "a bumper year" for Arrow, with production rising 63% and revenue up 65%. It also noted that while this growth required increased investment, year-end cash still rose from $12.1m to $18.8m.
The Canadian bank also said the upturn "really gained pace" in H224, with a step up in production at its Carrizales Norte asset following horizontal well drilling success, leading to Q424 production of 4,700 barrels of oil equivalent per day - double that of Q324.
Still, Canaccord took the more cautious approach to the production profile and said it had not included any production from Arrow's exploration targets until discoveries were made.
"As a result, we exclude potential new target development drilling from our capex profile. For 2026 and beyond, we currently assume a much lower capex programme with associated production declines. Exploration success and/or further intense development drilling could significantly change that profile," said Canaccord, which has a 'buy' rating on the stock.
"Our lowered production profile in combination with higher anticipated realised oil price discounts results in a reduced risked NPV12.5 target price of 28p (from 32p)."
Over at Berenberg, analysts lowered their target price on mining giant Glencore from 400.0p to 380.0p on Thursday after the firm's 2025 started "on a soft note".
Berenberg updated its model on Glencore following the company's Q125 operating update on 30 April, which was seen as a miss by both the analysts and the wider market.
"Operationally, a mixture of weaker grades, mine sequencing and some weather impacts at key assets resulted in production volumes coming in lighter than our expectations, particularly in copper and zinc," said Berenberg.
The German bank, which has a 'buy' rating on the stock, noted that guidance across the group was maintained, with the exception of a cut in thermal coal guidance to 87-95m tonnes from 92-100m tonnes.
Berenberg said "perhaps more disappointing" was the fact that Glencore's marketing business was tracking to the mid-point of its $2.2bn-3.2bn underlying earnings guidance range. Berenebrg said this would appear to mean that marketing was "not performing as well as the market was hoping" amid such global volatility.
"We update our model for the quarter, and move to the lower ends of the guidance range for copper and zinc. This reduces EPS by 6%. We then make negative adjustments to our marketing margins to bring EBIT in line with guidance; this takes our total EPS reduction for 2025 to -19%," said Glencore. "The share price reaction likely reflects the market's concern about further risks to volume guidance and weaker marketing performance. The shares are trading on 0.65x NAV and 2.7x 2025E EBITDA; in our view, Glencore needs a decent Q2 (we have been given implied Q2 volumes via the H1/H2 volume split), coupled with stronger thermal coal prices and/or some self-help levers being pulled to drive a re-rating."
Reporting by Iain Gilbert at Sharecast.com
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