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Monsanto Company Message Board

  • cal_sunshine2002 cal_sunshine2002 Sep 8, 2009 10:28 PM Flag

    Downside vs. upside of MON

    Downside: 1.Very challenging roundup sale in 2010.2. Rising seed price could hurt sale,cause antitrust investigation, and give away more market shares to competitiors. 3. Overall economy will still be challenging in 2010. 4. Really low crop price, and yet better yield, which could push price further down. Upside: 1. Economy may recovrey gradually. 2. Cheaper dollar.
    I seee cheaper dollar is the only strong reason could help MON next year. But byond 2010, I see very good future for MON. new seeds will pick up steam, roundup will fade out from the picture, and dollar could be much cheaper by then.

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    • Some interesting points made here, but totally pathetic analysis of risk/reward as valuation considerations not even discussed.

      MON trades at a massive valuation given the fundamentals. Earnings estimates have dropped from $4.90 to $4.10, a huge haircut. Everyone praying for seed sales to help stem the damage from the roundup collapse. If there is a recover in 2011, the longs have an extended wait to get paid while they own an overvalued stock with declining earnings estimates for 2090 and 2010.

      Risk/return picture is totally clear: TERRIBLE.

      Maybe we can revisit this dog in late 2010, on in 14 months.

    • FWIW, this is how I see it:

      Downside:

      1. Very challenging roundup sale in 2010. True, but Monsanto has been planning to replace Roundup revenue with revenue from seed sales for years. They already have that worked into their marketing plans.

      2. Rising seed price could hurt sale, cause antitrust investigation, and give away more market shares to competitors. I doubt it. Monsanto’s pricing strategy has been to price new seed traits at half of their value to farmers. An educated farmer will realize the value of the seed traits versus the price. Also - I suspect there are more seed companies willing to sell seeds to farmers than there are commercial banks for farm loans, or oil companies to provide fuel. If the government is looking for potential antitrust violators, my suggestion would be to investigate the commercial banking industry and oil companies. The conduct of these industries has done more harm to the nation’s economy the past couple of years than any seed company ever could.

      3. Overall economy will still be challenging in 2010. You’re probably right, but people still have to eat. I see Monsanto’s market to be fairly recession-proof.

      4. Really low crop price, and yet better yield, which could push price further down. Crop prices probably will get lower, but I believe most farmers will attempt to compensate for lower commodity prices by increasing yield while minimizing input costs, such as fuel and fertilizer. I see this as a strength for Monsanto.

      Upside:

      1. Economy may recover gradually. I hope you’re right. I don’t think Monsanto will be effected by overall economic conditions as much as most industries. I’d be a lot more concerned if I was Caterpillar or John Deere – you can delay buying a new tractor or combine a lot easier than delay buying seed for next season.

      2. Cheaper dollar. I see cheaper dollar is the only strong reason could help MON next year. But beyond 2010, I see very good future for MON. new seeds will pick up steam, roundup will fade out from the picture, and dollar could be much cheaper by then. Yep, I agree…

      • 1 Reply to lukewarm6262
      • FWIW, this is how I see it:

        Downside:

        1. Very challenging roundup sale in 2010. True, but Monsanto has been planning to replace Roundup revenue with revenue from seed sales for years. They already have that worked into their marketing plans.(That is why 2010 is trouble, but not beyond)

        2. Rising seed price could hurt sale, cause antitrust investigation, and give away more market shares to competitors. I doubt it. Monsanto’s pricing strategy has been to price new seed traits at half of their value to farmers. An educated farmer will realize the value of the seed traits versus the price. Also - I suspect there are more seed companies willing to sell seeds to farmers than there are commercial banks for farm loans, or oil companies to provide fuel. If the government is looking for potential antitrust violators, my suggestion would be to investigate the commercial banking industry and oil companies. The conduct of these industries has done more harm to the nation’s economy the past couple of years than any seed company ever could.(Logic? We are talking about seed. When crop price is low, farmer turn to cut cost ans try to stay float. If the benefit of choosing MON's high priced seeds don't cover the cost, they will not buy, and just use cheaper seeds to survive.)

        3. Overall economy will still be challenging in 2010. You’re probably right, but people still have to eat. I see Monsanto’s market to be fairly recession-proof.(People have to eat, but think about meat, dairy and such. When economy is down, the consumption of those will be down and less demond of crop. especially corn, that is why corn is so low now)

        4. Really low crop price, and yet better yield, which could push price further down. Crop prices probably will get lower, but I believe most farmers will attempt to compensate for lower commodity prices by increasing yield while minimizing input costs, such as fuel and fertilizer. I see this as a strength for Monsanto.(It probably hurt MON less than other seed companies, but the point is it still hurts its business)

        Upside:

        1. Economy may recover gradually. I hope you’re right. I don’t think Monsanto will be effected by overall economic conditions as much as most industries. I’d be a lot more concerned if I was Caterpillar or John Deere – you can delay buying a new tractor or combine a lot easier than delay buying seed for next season. ( Every business is affected by recession, more or less)

        2. Cheaper dollar. I see cheaper dollar is the only strong reason could help MON next year. But beyond 2010, I see very good future for MON. new seeds will pick up steam, roundup will fade out from the picture, and dollar could be much cheaper by then. Yep, I agree…

 
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