Is Mining and Trading Giant Glencore Still a Sell?

Investec’s Marc Elliott put out a new report on Tuesday. In it, he upped his price target on the stock—which trades on the London Stock Exchange—to 133 pence per share (or $1.75). That’s nearly 20% higher than his previous stock target, and much higher than what he and his colleagues predicted for the stock last fall.

The problem: Elliott’s price target, while higher, is still nearly 30% below the stock’s current price of180 pence per share. What’s more, Elliott’s opinion of the story hasn’t really changed. His rating: Sell.

Things have improved for Glencore, the sercretive Swiss commodities behemoth, since Elliott’s damning report on the company back in September. The current issue of Fortune has a feature detailing how the mining company has managed to resurface from what seemed like certain corporate doom to solid ground. According to the story, Glencore has sold 50% of its agricultural business to two Canadian pension fund for $3.1 billion, it has raised $2.5 billion in capital from the company’s senior managers, and it has put in place a plan to cut the company’s net debt to $18 billion. (read the full story here)

Back in the fall, Investec said, in a report titled “Bermuda Triangle,” that low metal prices, and Glencore’s pile of $44 billion in debt, would leave the company’s share’s essentially worthless. “[Our] spot price scenario results in an almost complete collapse in [Glencore’s] forward earnings,” wrote the analysts at the time, “In effect, debt becomes 100% of [enterprise value] and the company is solely working to repay debt obligations.”

The research note caused Glencore shares to plummet, sending them to nearly 90% below their 2011 IPO price. The stock has rallied this year, up 100% since Jan. 1, but remains well off its highs.

In effect, Elliott’s dire warning last fall was based on the assumption that prices of raw materials would stay where they were. He compared the impact of those low prices on the company’s bottom line to the amount of debt Glencore had at the time. Based on that, Elliott predicted that all of Glencore’s earnings would have to be diverted to debt payments forever—meaning the company would never be able to earn its way out of its debt hole. Prices of copper, zinc, and coal—commodities which are critical to Glencore—have rebounded a bit since last fall, but remain below where they were before the sell-off started.

The big difference is that Glencore has since raised money, cut costs, and sold assets to pay off its debt.

Back in the fall, Elliott expected that the company, if spot prices stayed where they were, would have earnings before interest, taxes, and depreciation costs of nearly $8 billion in 2015. Interest payments were supposed to equal as much as $1.8 billion, and the company’s depreciation costs were around $6.5 billion, putting it about $300 million in the hole. (In fact, Glencore took a large one-time charge, so it lost a lot more than that.)

Now Elliott expects Glencore’s EBITDA to come in at nearly $9 billion. It’s interest payments have dropped to $1.1 billion a year, and its depreciation expense, because it has sold off assets, is down to $5.8 billion. It has also slashed its capital spending from $6 billion to half of that.

All told, Elliott thinks the company can earn $1.5 billion this year. That still doesn’t lead Elliott to think the company is worth nearly $35 billion, which is Glencore’s current market cap. But he no longer thinks it’s worthless either. “As I said in my current report, if you adjust the discount rate I give it,” says Elliott, referring to the percentage by which analysts lower their projected earnings to account for inflation and risk, “and stock even qualifies to be rated a hold.”

In other words, Glencore may no longer be on the verge of collapse. And if you squint a little it might even look like it’s safe to hold on to. But the analyst who sounded the alarm on the stock in the first place still doesn’t think it’s worth buying.