On Thursday, Goldman Sachs initiated coverage on shares of Bayer AG (ETR:BAYGN) (BAYN:GR) (OTC: BAYRY) with a Neutral rating and a price target of €31.00. The firm cited the potential benefits of Bayer (OTC:BAYRY)'s new Direct Services Operations (DSO) operating model as a factor that could lead to improved performance. Nevertheless, the firm anticipates that ongoing litigation issues will continue to overshadow the company's narrative.
The analyst from Goldman Sachs provided insights into the financial expectations for Bayer, noting that their forecast for the company's FY2024 EBITDA is 3% higher than the market consensus. This projection includes a technical adjustment related to corporate costs.
The firm expects that the market consensus might be updated after the first quarter of 2024 to reflect these adjustments, although it does not foresee these changes leading to a sustained momentum in earnings.
Goldman Sachs also touched on the innovation prospects of Bayer, suggesting that while there are limited catalysts for innovation, there could be some upside potential. Specifically, the firm highlighted the possibility of Kerendia, a treatment for heart failure, to provide some positive results in the second half of 2024, with the FINEARTS-HF study outcomes anticipated.
The firm's position reflects a balance between the anticipated benefits of Bayer's operational changes and the persistent legal challenges that the company faces. The price target of €31.00 provides a reference for the market, aligning with the firm's expectations of Bayer's financial performance and product pipeline developments.
InvestingPro Insights
As Bayer AG (OTC: BAYRY) continues to navigate through its operational and legal challenges, the latest data from InvestingPro provides additional context for investors considering the company's prospects. According to InvestingPro, Bayer's market capitalization stands at a notable $29.37 billion, reflecting the size and scale of its operations in the pharmaceutical landscape. Despite recent headwinds, analysts predict that Bayer will return to profitability this year, an encouraging sign for investors looking for recovery signals.
InvestingPro Tips highlight that Bayer has maintained dividend payments for an impressive 33 consecutive years, showcasing the company's commitment to shareholder returns even amidst fluctuating market conditions. Additionally, Bayer's stock is known to trade with low price volatility, which may appeal to investors seeking stability in their portfolios.
From a valuation standpoint, Bayer's P/E ratio (adjusted for the last twelve months as of Q1 2024) is 7.97, combined with a strong free cash flow yield, suggesting that the stock might be undervalued relative to its earnings potential. Moreover, investors should note that four analysts have revised their earnings downwards for the upcoming period, which may warrant a closer examination of the company's financial outlook.
For those interested in a deeper dive into Bayer's financials and future prospects, InvestingPro offers additional insights and metrics. With the use of coupon code PRONEWS24, new subscribers can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, gaining access to a wealth of information including 7 additional InvestingPro Tips that could further inform investment decisions.
Whether you're gauging Bayer's dividend reliability or assessing its potential for a profitability turnaround, InvestingPro's comprehensive analysis can serve as a valuable resource in evaluating the company's market position and future potential.
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