Corteva (NYSE:CTVA), a pure-play crop protection provider, closed at $13.91, up 12.27% after JPMorgan upgraded Corteva in premarket trading. Investors are watching how the company will fare as a stand-alone company, now separate from its seed genetics business. Trading volume reached 38.9M shares, coming in about 285% above its three-month average of 10.1M shares.
How the markets moved today
The S&P 500 (SNPINDEX:^GSPC) closed at 7,820, up 0.59%, while the Nasdaq Composite (NASDAQINDEX:^IXIC) finished at 27,600, up 0.45%. Among agricultural inputs peers, Bayer (OTC:BAYRY) closed at $12.45, up 0.40%, and FMC (NYSE:FMC) closed at $9.02, up 0.22%; the group stayed on investors' radar as Corteva's upgrade and index reshuffling drew attention.
What this means for investors
It looks like Corteva is quickly becoming a Joel Greenblatt "special" of sorts following its recent separation from Vylor. While Vylor split with the "more interesting" business of seed genetics and a century-old germplasm library, Corteva's discounted, pure-play crop protection operations are worthy of not being forgotten about -- at least according to an analyst at JPMorgan.
Setting a $19 price target on CTVA stock, JPMorgan's bullish outlook on Corteva helped the latter's share jump 12% today. While uncertainty surrounds Corteva due to PFAS and PFOA legal liabilities inherited from its past ties to DuPont, JPM believes these costs should peak at $1.3 billion, or roughly $2 per share for Corteva, according to its modeling.
JPMorgan's $19 price target on CTVA stock reflects this expected impact, implying it still sees 37% upside in the stock. Trading at just 5.7 times the company's estimated 2027 EBITDA, Corteva might be an interesting deep-value opportunity for investors comfortable operating in this industry, but the legal liabilities worry me too much, personally, even with the company's pristine balance sheet.
Josh Kohn-Lindquist has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.