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- Syngenta AG (ADR) (NYSE: SYT) shares are up 6 percent year-to-date, despite having declined steadily over the past six months.
- UBS analyst Thomas Gilbert downgraded the rating on the company from Buy to Neutral, while reducing the price target to CHF314 from CHF475.
- Gilbert has removed the M&A premium from the company’s valuation and trimmed the 2016 estimates.
Although Monsanto Company (NYSE: MON) sweetened its informal bid for Syngenta, the latter unexpectedly declined again to enter formal talks. Analyst Thomas Gilbert believes that Monsanto would not go hostile, since “one of the key components of its value proposition to its shareholders is the monetisation of presumably sizeable antitrust divestments.”
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Without being able to do due diligence, Monsanto would not be able to capture that value. With Monsanto walking away and BASF Agricultural Products and Bayer CropScience likely being “comfortable with the status quo of the industry structure,” UBS has removed the M&A premium from the last published price target and reverted to the prior investment thesis.
Gilbert added that the outlook for soft commodity prices has deteriorated further, “delaying what we saw as 2016 cyclical recovery of crop chemicals volume sprayed and seed plantings for food staples” into 2017. Around 55 percent of Syngenta’s sales is dedicated to corn, soy and cereals farming.
The EPS estimates for 2016 and 2017 have been reduced from $20.86 to $18.52 and from $23.87 to $22.46, respectively.
“We believe Syngenta shares - which used to be a shelter of defensive stability - are likely to remain volatile for a period, both due to uncertain earnings outlook and various possible impacts on its trading multiple,” Gilbert added.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.