Bayer’s rock-bottom sentiment and valuation continue to offer a credible, de-risked entry point, in our view. The stock trades below 9x 2023E P/E. Bayer’s relatively cautious guidance for 2022 is too conservative, as agro markets in particular have sustainably rebounded, backed by strong crop prices. Pharma: while Eylea and Xarelto are faced with patent loss, their respective sales are holding up better than expected so far, and Bayer has a broader pipeline of new compounds with >EUR5bn of peak sales. Any kind of change can only be good news: litigation progress, activism, ESG improvement.
Catalysts:
- Confirmation from Bayer of a brighter crop market outlook.
- Progress on glyphosate litigation.
- Next quarterly report to provide further clarity on improving earnings momentum.