Bayer share price is in a freefall: is it safe to buy the dip?

Bayer (ETR: BAYN) share price has been in a strong freefall and it sits at its lowest level in almost 20 years. The stock crashed to a low of €25.57 on Thursday, making it the worst-performing company in the DAX index. It has dropped by more than 76% from its all-time high as it faces a mountain of headwinds.

Bayer has been one of the most embattled companies in corporate Germany. It faces a mountain of headwinds ahead.

The company has a truckload of debt, faces substantial Roundup liabilities, has slashed its dividend, and its healthcare division faces a weak pipeline and has a lot of patent expiries. 

Further, the company is not making improvements as evidenced by this week’s earnings. It revenue continued falling, reaching €47.63 billion in 2023 while its EBITDA fell by 13% to €11.3 billion. 

Its divisions recorded weak sales. Crop science’s revenue crashed by 3.7% to €23.7 billion as the prices of glyphosate retreated. Its pharmaceutical and consumer health business had modest growth for the year.

Worse, Bayer’s management believes that its business will continue struggling this year, with revenue expected to come in at €47 billion. Instead, the company hopes to stabilise its business and move back to growth by 2026.

Still, the company faces major headwinds that could affect its stock price. First, the company recently slashed its dividend recently, and chances of increases remain low as it handles its significant debt load. It did that in a bid to save cash and reduce its significant debt load.

Second, the company will likely need to increase its provisions for liabilities from the current €6 billion to about €7 billion. This issue stems from its bungled acquisition of Monsanto in an almost $64 billion deal. As a result, the market expects that Bayer will need to raise new capital, an allegation that the management has rejected.

Third, and most importantly, it has several patent expiring soon. Eylea’s patent will expire in 2025 while Xarelto will expire in 2026. A patent expiry opens a sector to competing products.

Most companies handle this expiry by boosting their R&D or making huge acquisitions. Unfortunately for Bayer, chances for acquisitions are relatively small now that its balance sheet is a mess.

BAYN chart by TradingView

The weekly chart shows that the BAYN stock price has been in a freefall in the past few years. Most recently, the stock made a break and retest pattern as it rose back to the key point at €35.70. 

The Average Directional Index (ADX) has surged to almost 50, meaning that the downtrend is accelerating. Also, the Relative Vigor Index (RVI has pointed upwards. Therefore, the outlook for the stock is still bearish, with the next point to watch being at €20.

The post Bayer share price is in a freefall: is it safe to buy the dip? appeared first on Invezz