Response to the volatility and unpredictability of Monsanto (NYSE:MON) has generated responses from analysts all over the board. The latest is from JPMorgan (NYSE:JPM), who increased their price target on Monsanto from $47 to $49. They maintain a "Neutral" rating on the seed company.
In a report JPMorgan said, "We rate Monsanto Neutral for year-ahead performance. Monsanto's business model for F2011 was built on moving its customer base from its triples to SmartStax at a price premium. The poor yield results for SmartStax in Southern Illinois, if duplicated in the northern Corn Belt, could call the model into question. Moreover, we believe Monsanto has a healthy valuation selling at 9.6x EBITDA and a 17.4x multiple of EPS for F2011E."
There is no doubt in the short term that Monsanto is completely reliant upon the results of their SmartStax corn seed in the northern corn belt. If it is as bad as it was in Illinois, they're going to have difficulty building momentum for some time, even with their strong advantage in other seed varieties.
They also took a blow when their sugar beet seeds were ruled against by a judge, and unless overruled or adjusted, won't be able to be planted next season.
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