Has the stock reached its end?
**Bayer Faces Challenges as EBITDA Drops and Cash Flow Remains a Concern**
In a recent financial report, Bayer (BAYRY) saw a 25.8% decrease in EBITDA before special items, falling to 1.251 billion euros. This decline comes as the company keeps a close eye on cash flow, with CEO Bernd Förtsch having entered into positions in Bayer financial instruments that could benefit from the stock's price development.
Despite this setback, Bayer's stock has shown signs of improvement in 2025, surging 62.9% year-to-date. This rebound follows several years of challenges, including patent expirations, litigation, and regulatory hurdles. The company's pharmaceutical division has been a bright spot, buoyed by new drug launches and pipeline successes, offsetting declines in legacy products.
One key growth catalyst for Bayer is the potential approval of sevabertinib, an oncology drug currently under FDA Priority Review. If approved, sevabertinib could command premium pricing due to a lack of competitors in its niche. Additionally, the FDA recently approved a significant label expansion for Kerendia, making it the only non-steroidal mineralocorticoid receptor antagonist approved in the U.S. for chronic kidney disease associated with type 2 diabetes and for heart failure with preserved ejection fraction.
However, Bayer's earnings performance has been mixed, with the company beating expectations in one of the last four quarters, meeting expectations in two, and missing in one. Analysts have modestly raised their consensus EPS estimates for 2025 and 2026, reflecting cautious optimism. One prominent recommendation is to buy Bayer at current levels, with a price target of €33 by the end of 2026.
Despite the optimism, investors should remain cautious due to persistent legal and operational risks. Bayer's net financial debt decreased to 35.037 billion euros in Q3 2024, primarily due to cash inflows from operating activities and positive currency effects. The company plans to offset this decrease through accelerated cost and efficiency measures.
Investors should also be aware of the ongoing challenges facing Bayer. The company's consolidated net income for Q3 2024 was -4.183 billion euros, with EBIT deteriorating from -3.594 billion euros to -3.822 billion euros. Bayer's stock has decreased around 10% due to these weak quarterly figures, and finance chief Wolfgang Nick expects a decrease in sales and earnings for the next year.
In summary, while Bayer's pharmaceutical pipeline and regulatory wins have sparked optimism among investors, the company continues to face significant challenges. Analysts recommend a cautious approach, with a focus on continued pipeline execution and cost discipline. Investors should carefully monitor upcoming earnings reports and regulatory milestones before considering investment in Bayer stock.
Investing in Bayer's stock could potentially benefit from the stock's price development, given that the CEO has entered into positions in Bayer financial instruments. However, the company's earnings performance has been mixed, and analysts have cautiously raised their consensus EPS estimates.
