Political Fantasy Outweighs Fundamentals
BASF's stock rebounds despite analyst warnings and operational struggles
Analyst Sebastian Bray is responding to shifting political and market conditions that have softened his previously skeptical stance.
Since his sell recommendation in mid-October 2025, the consensus earnings forecast for the chemical giant has fallen by roughly 15%. This decline has validated a core part of his original thesis. However, the stock price has since rebounded significantly—a recovery driven primarily by political momentum.
Bray points in particular to Germany's fiscal package and the potential extension of free emissions allowances beyond 2026. Both factors fuel expectations that energy-intensive industries could receive long-term relief. For BASF, Europe's largest chemical company with substantial energy demands, this outlook is highly consequential.
The reassessment, then, reflects less an operational turnaround than a shift in valuation parameters. While earnings expectations have been revised downward, the prospect of political change has triggered a valuation premium. The market appears to anticipate that structural burdens may at least be partially mitigated.
As a reference, Bray cites the steel sector, where political support has visibly bolstered stock performance. The example illustrates how far a recovery can extend when industrial policy measures take effect and investors gain confidence in government backing.
For BASF, the operational environment remains challenging. Weak economic signals from Europe, volatile energy prices, and fierce global competition continue to weigh on margins. At the same time, the company is pursuing structural adjustments, including cost cuts and portfolio optimization.
Bottom line: The chemical sector's train has left the station. Whether it can gather steam—much like steel stocks, some of which have multiplied in value—remains to be seen. Both ThyssenKrupp (with its TKMS IPO) and Salzgitter (through its Aurubis stake) had their own catalysts. One thing is clear, though: Even when a sector is written off, it doesn't necessarily spell bad news for its stock performance. In Carnival terms: We'll soon see if this train still has any brakes left...
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