Betting The Farm On Monsanto
Wall street analysts are trying to keep up with Monsanto's (MON ) fast-growing sales and earnings as a major provider of agricultural products for farmers. Robert Levitt, founder and chief investment officer of Levitt Capital Management, which owns Monsanto shares, says investors should jump on the "global agribusiness theme" to profit from the explosive growth he sees over the next several decades. He says the U.N. estimates that by 2030 demand for agricultural products will be 60% higher than it is today. And Monsanto, says Levitt, is among the big winners. "There are now 80 million new mouths to feed every year," he notes, so food production will have to grow as fast. "Monsanto is the undisputed leader in the agri-biotech space," says Robert Koort of Goldman Sachs (GS ) (it has done banking for Monsanto), who rates the stock a buy. Apart from farmers, Monsanto's products are used by grain processors, food companies, and consumers. Its product pipeline "is sufficiently robust," he says in a report, which justifies the stock's premium multiple of 34 times his 2007 estimate of $1.70 a share. For 2008, he sees $2.50. He expects the stock, now at 58.51, to be at 75 in 18 months.
Note: Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.
By Gene G. Marcial