Bayer AG (ETR:BAYN, OTC:BAYZF) will find it tough to hit last year's targets and faces multiple adverse factors in 2024, said Stifel as it downgraded the German pharma giant and cut its share price target.
The US bank removed its 'buy' rating with a switch to a 'hold' stance with a reduced price target of €42 from €68.
Analysts think Bayer "will find it tough" to reach the lower end of the 2023 earnings guidance of €11.3 billion excluding current effects.
According to new Bayer chief executive Bill Anderson, a separation of one segment but not of two at the time is on the agenda.
Stifel said the mooted separation of Bayer's Consumer Health arm "can create value, but is no short-term solution for the stretched balance sheet".
Spinning off Bayer Crop Science "would destroy value, in our view" and would be "basically reversing the Monsanto acquisition", the analysts said.
Both deals would create substantial demerger costs and require at least 18 months for the carve-out plus a period of selling down the stake after the IPO, which might last another two to three years.
Looking at the investment case, Stifel anticipates earnings expectations will reduce over the coming months, with EBITDA potentially falling down 11% in 2024, after a decline of circa 20% in 2023.
"We were hoping that the glyphosate litigation risk would fade, but after losing four cases with one asking for a punitive damage of US$1.5 billion, the topic continues to weigh on the share price," the analysts said, of the weedkiller better known via the Roundup brand.
In the Pharma business, the early-stage pipeline shows "solid progress", but this "usually has a limited impact on the share price".