BASF's Proposed Selling Off of Certain Assets
Skipping the Storm: BASF's Mixed Profit Outlook
Weeks pass, and a potentially larger escalation in the Middle East is fortunately averted. Economists remain optimistic, believing this could be just another temporary conflict, limiting its impact on the global economy. This piece of news brings smiles to cyclical companies, such as the chemical titan, BASF. Upon the commencement of the week on the Xetra trading platform, BASF's stock surged around 0.7 percent.
Despite a sell recommendation from US bank JPMorgan, investors showed no signs of concern. JPMorgan's analyst, Chetan Udeshi, once more rated BASF as "underweight" with a target price of 40 euros. Udeshi forecasts that BASF's results will probably align with market expectations. However, Udeshi cautions that the short to medium-term outlook for results is challenging. BASF is slated to release its half-year financial report on July 30.
Udeshi also flags potential geopolitical tensions leading to a sustained and significant increase in oil prices, which could further diminish BASF's profits. Nevertheless, at the start of the new trading week, there were glimmers of relief on the oil market as both the North Sea Brent crude and WTI (West Texas Intermediate) experienced a downward movement following their recent rally, triggered by the escalation between Israel and Iran.
BASF (WKN: BASF11) depends on a robust global economy for its success. While short-term geopolitical tangles in the Middle East cast shadows on the overall picture, the long-term outlook for the Ludwigshafen chemical giant remains favorable. Therefore, those who embrace a long-term investment strategy may continue to invest in the blue-chip stock. A stop at 31 euros ensures the protection of the position.
Notable Developments
- BASF's Quest for Industry Leadership: Despite recent setbacks, BASF is unwavering in its ambition to reach the pinnacle of the industry[2].
Market Predictions and Challenges
- Analysts suggest BASF's traditional chemical segments, which comprise approximately 70% of its exposure, are projected to witness significant profit growth after 2025. However, 2025 itself is forecasted to exhibit flat growth due to lingering slow demand and tariff-related concerns across major sectors like automotive, construction, and electronics[1].
- Kepler Cheuvreux has lowered BASF’s price target to €57 from €67, reflecting the near-term challenges but maintaining a Buy rating, demonstrating optimism in the company's long-term recovery prospects[1].
- On the earnings front, Berenberg has reduced BASF’s earnings forecasts, expressing skepticism that the Q2 2025 results will significantly alter the cautious outlook[3].
- Jefferies has downgraded BASF to a Hold rating, emphasizing weak earnings momentum and projecting 2025 EBITDA at €7.16 billion, below BASF’s own guidance of €8 billion to €8.4 billion. Delays and lower-than-expected returns from the ramp-up of BASF’s China Verbund site are pegged as contributing factors for the decline in profitability[4].
The author himself holds direct positions in BASF and other related financial instruments that could profit from the potential price development resulting from the publication.
[1] - Kepler Cheuvreux, BASF Q1 2025 Results Analysis[2] - Reuters, "BASF confirms war against Bayer"[3] - Berenberg Research, BASF Q2 2025 Earnings Preview[4] - Jefferies, BASF Q2 2025 Earnings Preview[5] - BASF Company Report, 2025 Q1 Results Analysis by Zacks Equity Research.
- In the context of BASF's mixed profit outlook, investors might find investing in the company's traditional chemical segments promising, as analysts project significant profit growth after 2025, despite flat growth predicted for 2025 itself.
- The long-term business strategy of BASF, with its ambition to lead the industry, could be a compelling reason for finance-oriented individuals to invest in this blue-chip stock, given the optimistic long-term recovery prospects as suggested by analysts.
