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BofA analyst Steve Byrne upgraded Bunge Limited (NYSE:BG) to Buy from Neutral, trimming the firm’s price target on the stock to $135 from $140.
Bunge, an agriculture and food business, is down 29% from its April high on broad macro concerns and recently emerging concerns about this agriculture cycle, said Byrne.
“In our view we see little risk to the ag cycle, especially as more and more data points to a sharp reduction in fertilizer applications globally, biofuel standards have not been rolled back as expected, and US weather during planting season was unfavorable – all supporting elevated crop prices,” wrote Byrne. “We also like the limited correlation between the global ag cycle and economic cycle.”
As a result, BofA views the sell-off in Bunge as “largely unwarranted.”
“We see BG as offering a better risk/reward vs ADM on more attractive valuation (especially since BG’s stock has underperformed ADM both on a 1-year and ytd basis, as well as since April) and a bigger focus on soft commodities trading/merchandizing and soybean crushing. Both businesses are unlikely to be affected by a recession and should have structural tailwinds for the next few years.”
