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On Tuesday, Jefferies adjusted its stance on BASF SE (BAS:GR) (OTC:BASFY), changing the stock rating from Buy to Hold and reducing the price target from EUR 52.00 to EUR 47.00. The decision comes as Jefferies analysts note a significant decline in upstream product spreads throughout the quarter, prompting a reassessment of the chemical giant’s financial outlook.
The revised price target represents a more cautious valuation approach, taking into account a greater risk weighting and market-to-market peers. Despite recognizing positive internal developments at BASF, such as asset divestments, Jefferies believes the negative earnings momentum driven by challenging spreads and demand poses a substantial obstacle.
Jefferies’ analysis indicates that their earnings estimates for BASF now sit 11% below the lower end of the company’s guidance. This downward adjustment reflects the persistent downward pressure on product spreads, which are essential for the company’s profitability.
The report from Jefferies underscores the difficulties facing BASF in a volatile market environment. The firm’s analysts have weighed the positive internal changes against external economic factors and concluded that the latter currently overshadow the former.
In summary, Jefferies has downgraded BASF stock to a Hold rating and set a new price target of EUR 47.00, citing the impact of declining product spreads and challenging demand conditions on the company’s earnings potential.
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