Goldman Sachs maintains a Buy on Bayer AG and raises its target price to €62.50 as litigation risk recedes
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Goldman Sachs maintains a Buy on Bayer AG and raises its target price to €62.50 as litigation risk recedes
The report expects Bayer's 2Q26 revenues to come in slightly below Visible Alpha consensus while EBITDA is roughly in line, with the investment focus shifting from glyphosate litigation to de-risking via Ruveon, improving pharma margins, and potential value release from a break-up.
- Goldman Sachs expects 2Q26 group sales to be 2% below Visible Alpha consensus and pre-special EBITDA to be 1% below, but views overall results as roughly in line because optimistic Pharma margin assumptions offset the revenue gap.
- Goldman Sachs expects FY26 guidance to be reaffirmed, with visible Alpha consensus for group sales and pre-special EBITDA near the midpoint of company guidance; Core EPS is slightly above guidance by around 3%.
- After a favorable U.S. Supreme Court ruling for Bayer, the class action settlement fairness hearing was delayed to August 19; Ruveon integration may help isolate future glyphosate liabilities.
- The target price was raised 14% from €55.00 to €62.50, driven mainly by rolling forward DCF, lowering the Pharma discount from 25% to 15%, and reducing WACC from 9.3% to 8.8%.
Report interpretation
Overview
This is a Goldman Sachs 2Q26 performance update and valuation report on Bayer AG. The report expects 2Q26 group sales to come in slightly below consensus, mainly due to margin pressure on Xarelto and Eylea in Pharma and timing differences in Crop segment corn and soybean seed and trait revenue, but pre-special EBITDA is expected to be broadly in line because Goldman Sachs is more constructive on Pharma margins. On litigation, the favorable U.S. Supreme Court ruling and the Ruveon integration reduced glyphosate risk, leading Goldman Sachs to maintain Buy and raise its target price.
Core views
Core views include: first, 2Q26 results should be broadly in line with the market, with sales below consensus but margin support keeping EBITDA near expectations; second, FY26 company guidance is expected to be reaffirmed; third, glyphosate litigation risk has eased with the U.S. Supreme Court outcome, and Ruveon could help separate future liabilities from the Bayer core; fourth, as litigation pressure is partly relieved, markets may re-rate Bayer's group structure, possible Consumer Health separation, and potential release of around €10 of group-level SOTP discount; fifth, high-margin Pharma products such as Kerendia, Nubeqa, and asundexian are seen as key long-term drivers of margin recovery.
Analysis framework
The report combines earnings preview, visible Alpha consensus comparison, litigation event-path analysis, segment-level valuation discounting, and a weighted DCF/SOTP valuation framework. Goldman Sachs assigns 50% weight each to DCF and SOTP to derive a 12-month target of €62.50, while also updating FY26-30 forecasts using FX, IQVIA prescription trends, and company commentary.
Methodology notes
discounted cash flow valuation
Goldman Sachs applies a 50% DCF weight to its target price. The DCF per-share value was raised from €54 to €65, mainly on the assumption that WACC fell from 9.3% to 8.8% while terminal growth remained at 1.5%.
sum-of-the-parts valuation
Goldman Sachs assigns a 50% weight to SOTP valuation, lifting the SOTP per-share value from about €56 to €60, mainly due to a lower Pharma discount.
Goldman Sachs forecast versus Visible Alpha consensus
The report compares Goldman Sachs forecasts with Visible Alpha consensus to assess 2Q26 deviations for sales, pre-special EBITDA, and Core EPS.
Litigation overhang risk analysis
The report evaluates the impact of the U.S. Supreme Court ruling, postponement of the class settlement fairness hearing, and Ruveon's role in isolating long-term glyphosate liabilities.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- Bayer AG equityCoverage target and recommendation vehicle
- Strengths
- Buy rating, higher target price, reduced litigation risk, and expectation of improving Pharma margins provide valuation support and potential SOTP discount release.
- Weaknesses
- 2Q26 sales are expected to be below consensus; Pharma faces generic pressure on Xarelto and Eylea, and historical R&D productivity has been relatively weak.
- Comparison
- Goldman Sachs expects FY26-30 total sales to be broadly near Visible Alpha consensus, while FY29-30 pre-special EBITDA is 6%-9% above, mainly due to more constructive Pharma margin assumptions.
- Risks
- Crop Science profitability could turn negative, generic pressure in Pharma could exceed expectations, and litigation progress could turn unfavorable; DSO operating model benefits may materialize more slowly.
- RuveonBayer's wholly integrated U.S. glyphosate vehicle
- Strengths
- Could separate future glyphosate liabilities from the Bayer core and allow management to focus on distinct strategic businesses.
- Weaknesses
- Settlement payments and residual litigation risk remain to be monitored; carve-out or isolation arrangements have not been fully proven.
- Comparison
- Compared with Bayer directly retaining all risk on balance sheet, a Ruveon structure may improve clarity of litigation-liability boundaries.
- Risks
- Uncertainty remains around the fairness hearing, the number of opt-outs, uncovered future cases, and subsequent carve-out execution.
- Pharma segmentKey segment for Bayer valuation and margin recovery
- Strengths
- Goldman Sachs is constructive on Pharma margins, and high-margin sales from Kerendia, Nubeqa, and asundexian are expected to support FY29-30 EBITDA.
- Weaknesses
- Xarelto and Eylea face generic pressure, and Goldman Sachs notes historical R&D productivity may not fully offset patent expiry risks into the 2030s.
- Comparison
- Goldman Sachs reduced Pharma discount to peers from 25% to 15%, viewing revenue growth outlook as closer to single-digit industry growth.
- Risks
- Generic pressure worse than expected, prescription trend deceleration, and R&D pipeline execution disappointments.
Key data
- 12-month target price€62.50Raised by 14% from €55.00.
- Current price€53.36Based on the report's July 3 close.
- Implied upside17.1%Calculated from a €62.50 target price versus a €53.36 current price.
- 2Q26 group sales forecast deviation2% below Visible Alpha consensusMainly due to generic pressure in Pharma and crop revenue pacing.
- 2Q26 EBITDA pre-special forecast deviation1% below consensusGoldman Sachs is more constructive on Pharma margins, so the gap is smaller than on the revenue line.
- 2Q26 Core EPS forecast deviation8% below consensusThe report suggests this may stem from consensus calculation issues, as Core EBIT and Core Net income are broadly in line.
- WACC assumption8.8%Previously 9.3%, reduced due to lower litigation risk.
- Pharma valuation discount15%Previously 25%, as Goldman Sachs believes Pharma revenue-growth outlook is closer to industry norm.
- DCF valuation€65/shareGiven 50% weight in target price; previously €54.
- SOTP valuation€60/shareGiven 50% weight in target price; previously around €56.
- Market capitalization€52.4bn / $60.0bnDisclosed in report Key Data.
- Enterprise value€86.0bn / $98.4bnDisclosed in report Key Data.
Impact & implications
The investment implication is that Bayer's short-term performance sensitivity is driven more by Pharma margin recovery and FY26 guidance stability, while valuation upside is primarily tied to reduced litigation risk, potential Ruveon-driven isolation of glyphosate liabilities, improved group structure, and narrower Pharma discount. If the glyphosate settlement path progresses smoothly, the market may further reduce the risk discount for long-dated litigation liabilities and re-rate Bayer's segment value.
Risks
- Crop Science profitability momentum turning negative again.
- Pharma generic competition being worse than expected, weighing on segment earnings development.
- Adverse outcomes in glyphosate and other litigation processes or slower-than-expected settlement progress.
- Cost and operating upside from the new DSO operating model realizing more slowly than expected.
- Hot and dry weather in the Northern Hemisphere could affect planting patterns, crop yields, and 3Q26 seed return levels.
- If key pipeline assets such as umipsogene parvec deliver poor data, it could weaken AskBio platform and Pharma growth narrative.
What to watch
- Bayer to report 2Q26 results on August 4 at 6:30 BST.
- August 19 class-action glyphosate settlement fairness hearing and updates on settlement opt-outs.
- Impact of Ruveon integration on the current glyphosate settlement roadmap and future uncovered cases.
- Management confidence on getting the settlement through the hearing and whether opt-out numbers remain below Bayer's threshold.
- Changes in Bayer’s group structure, including potential Consumer Health spin-off or other actions that could unlock the group discount.
- Phase 2 data for umipsogene parvec and its validation significance for the AskBio platform.
- Sales and prescription trends for high-margin Pharma products such as Kerendia, Nubeqa, and asundexian.
- FY26 guidance risks in Crop Science under heatwave and drought conditions.