Bayer share price analysis: why is this DAX index stock falling apart?

Bayer share price crashed to its lowest level in over twenty years as concerns about its future continued. It plunged to a low of €20.54 on Tuesday, bringing the year-to-date losses to about 40%. Worse, it has dropped by over 80% from its highest level in 2015, costing investors billions of dollars, and making it one of the top laggards in the DAX index.

Bayer share price implodes after earnings

The main catalyst for the Bayer stock price is its weak financial results, which came out on Tuesday. In its report, the company said that its group sales dropped to €9.6 billion, while its earnings before interest, depreciation, and armotisation dropped by 25% during the quarter. 

The numbers showed that the volume of products sold fell by 1% after growing by 9.3% in the same period last year. This decline was partially offset by a 1,6% increase in prices, but then again affected by forex rates. Bayer’s sales in EMEA and Latin America retreated by 1.1% and by 13.8% during the quarter. 

The results also revealed that the company continued to make substantial losses. Its net loss stood at €4.18 billion, an improvement from the €4.5 billion it made last year. Most of these losses came from impairments associated with Monsanto.

Most of the weakness was in its agricultural business, which includes Monsanto, a company it acquired in 2018 for $63 billion. Today, the combined company has a market cap of €21.75 billion, much lower than what it spent to buy Monsanto.

The management attributed the weak performance to the trends in the agricultural sector where most prices have plunged. Wheat has dropped by 23% from its highest level this year and 60% from its 2021 highs. 

Similarly, corn price has plunged by 40% from its highest level in April 2022, while soybeans have fallen by 27% from the same period. In most cases, farmers spend less amount of money when prices of key commodities are falling. 

The weakness could continue in the coming months as Donald Trump is set to restart his trade war with China. The last time he implement huge tariffs on China, Beijing announced measures to block US crops from entering the country. Since then, China has increased the production of key crops substantially.

Bayer is facing many other challenges. In addition to the ongoing slowdown, the company said that US regulators will not approve soy seeds to be used with dicamba weedkiller by the next planting season as expected. Also, European regulators have pulled Movento, an insecticide because of climate issues.

Is the Bayer stock price a bargain?

To some extent, Bayer share price is a big bargain because of its strong market share in areas like crop science and health. Besides, this is a stock that was trading at €106.54 in April 2015 that has now moved to €20. 

The challenge, however, is that any time Bayer has made progress, bad things have happened. For example, the stock rose in 2023 after it unveiled a new executive who vowed to streamline its business.

There were also rumours that it wanted to spin off its consumer health and crop science businesses. These actions have not gone anywhere and its business has continued to deteriorate. Most recently, the stock bounced back after the company won a lawsuit about Roundup in the United States.

Bayer shares analysis

The daily chart shows that the Bayer stock price has been in a strong sell-off for a long time. Most recently, it formed a bearish flag pattern, a popular negative sign, which explains why it made a breakdown.

Bayer has remained below the 50-day and 100-day Exponential Moving Averages (EMA). Also, the PPO indicator and the Relative Strength Index (RSI) have all pointed downwards.  Therefore, the Bayer share price will likely continue falling as sellers target the key support at €15. 

Read more: Bayer shares fall 7% as US court reconsiders Monsanto PCB exposure case

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