Key Takeaways
- Corteva shares jumped 11% after JPMorgan upgraded the stock to Overweight with a $19 price target.
- The sell-off after last week’s seed spin-off looks overdone, and JPMorgan calls the crop chemicals business left behind undervalued.
- JPMorgan puts fair value for a high-quality crop chemical company at about $21 a share, but that figure leaves out environmental liabilities, which are the main risk.
- Corteva’s first earnings report since the split comes on Nov. 11.
Corteva (CTVA) shares soared 11% today after JPMorgan argued that the part of the company left behind by last week’s spin-off is the bargain.
Corteva finished spinning off its seed and genetics business, now Vylor, on Thursday. That day, Corteva’s own stock reset almost 85% lower, since most of its value had gone with the seeds.
What’s left is a crop chemicals company worth about $9 billion.
The upgrade
Before today’s open, JPMorgan analyst Jeffrey Zekauskas raised Corteva to Overweight from Neutral, with a $19 price target. Here’s his pitch in one line:
“Corteva is the cast off: and we think it is undervalued at the current price.”
JPMorgan thinks a “high-quality” crop chemical company is worth about $21 a share, before environmental liabilities. Even after today’s jump, the $19 target means [nearly 40%] upside.
Shares were up about 3% before the open. By mid-morning Barron’s had joined in with a piece headlined “Corteva Stock Can Gain 50% After Post-Spin Confusion,” and the stock kept climbing.
Why the cast off can be the bargain
Spin-offs often leave one side orphaned. Plenty of investors likely owned Corteva for its seeds. Some of last week’s selling probably came from them.
JPMorgan isn’t alone, either. On Monday, Oppenheimer cut its Corteva target to $17 from $95 to reflect the split, and it kept its Outperform rating.
The main risk is the thing JPMorgan’s $21 valuation leaves out: environmental liabilities. It is the biggest unknown in the stock.
Corteva reports its third quarter on Wednesday, Nov. 11, after the close. It will be the company’s first report since the split.
Last week the market priced Corteva like an afterthought, and two analysts now have targets well above where it trades.
Of course, Corteva has been a standalone crop chemicals company for less than a week, so November’s numbers will be the first real test.
So what is Corteva stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Corteva could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
