Monsanto Company (MON): Buy Monsanto Stock, Takeover or Not

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Monsanto Company (NYSE:MON): This global provider of agricultural products — despite having exposure to global markets, currencies and weather — has earned a “four-star buy” rating from Standard & Poor’s. S&P points out that its slow exposure to economic cycles and consistent cash flow generation offsets the other risks.

Monsanto, which reports on an August fiscal year, is expected to report Q3 profits of $4.47 per share when it announces earnings in October, down from $4.75 last year. S&P estimates that earnings will rebound 13% to $5.03 in 2017, however.

Last month, Bayer AG (OTCMKTS:BAYRY) offered to buy Monsanto for an effective price of $122 per share, but management balked at the price despite making it known that the company or major parts of it was for sale. Yesterday, Bayer increased its offer by $3 to $125 per share, and also offered MON a $1.5-billion reverse-breakup fee should the deal be blocked by regulators.

Rumors of a breakup and sale of Monsanto have circulated for over six months, but with the Bayer offer now on the table, it is possible that the pair will finally strike a deal, albeit at an even higher price. According to a comment by Professor John Colley of the Warwick Business School, shareholders likely will accept Bayer’s takeover offer.

S&P has a one-year target of $113, disregarding a takeover.

Technically, MON executed a break-away-gap from a descending right triangle in April. This type of gap is often not closed and was confirmed by slicing through its 200-day moving average and thus reversing its trend. In May it gapped again, proving that the second gap was a bullish run-away-gap, which in retrospect formed a bullish wedge. MACD triggered a new buy signal yesterday on higher-than-average volume, and the stock closed close to its high of the day — all bullish signals.

Buy MON at about $106 with a trading target of $120 for a possible trade of over 13%.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/07/monsanto-company-mon-stock-buy/.

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