BASF's Strategic Buy Rating Upgrade and Undervaluation Potential in 2025

In November 2024, Goldman Sachs made a significant move by upgrading BASF SE from “Neutral” to “Buy,” raising its price target from €45 to €53Goldman raises BASF to 'Buy' - target up to 53 euros^[1]. This decision, rooted in a confluence of microeconomic and macroeconomic catalysts, signals a pivotal moment for the world's largest chemical producer. As the company emerges from a prolonged earnings downturn, investors are now scrutinizing whether BASF's strategic repositioning and undervalued fundamentals justify the optimism.

Catalysts for a Near-Term Re-Rating

Goldman Sachs' upgrade hinges on what it terms the “rule of three” investment framework: trough margins, management acknowledgment of challenges, and early signs of recoveryGoldman Sachs raises BASF stock PT to EUR53, upgrades rating to Buy^[2]. BASF's Q3 2024 results provided the latter, with €15.7 billion in sales and a 5% year-over-year increase in EBITDA before special items to €1.6 billionGoldman Sachs raises BASF stock PT to EUR53, upgrades rating to Buy^[2]. These figures, coupled with the company's commitment to €2.1 billion in annual cost savings by 2026 under its “Winning Ways” initiative, underscore a credible path to margin expansionGoldman Sachs raises BASF stock PT to EUR53, upgrades rating to Buy^[2].

The firm also highlighted BASF's geographic diversification as a key strength. With 90% of sales in Europe and North America sourced from local production, the company is shielded from direct tariff impacts and geopolitical volatilityBASF SE: Target Price Consensus and Analysts^[4]. This localized strategy contrasts sharply with peers reliant on global supply chains, positioning BASF to capitalize on regional demand resilience in sectors like agriculture and surface technologiesGoldman Sachs raises BASF stock PT to EUR53, upgrades rating to Buy^[2].

Macro trends further amplify the case for a re-rating. The global chemical industry, while facing overcapacity and high energy costs, is projected to stabilize in 2025, with BASF's diversified portfolio offering a buffer against sector-specific downturnsBASF Faces Significant Challenges in Q2 2025 - Globuc^[5]. Goldman Sachs argues that the convergence of these factors—improved operational efficiency, regional demand stability, and a broader industry inflection point—creates a “perfect storm” for a valuation catch-upGoldman raises BASF to 'Buy' - target up to 53 euros^[1].

Undervaluation Metrics and Peer Comparison

Despite Goldman Sachs' bullish stance, BASF's valuation remains contentious. The stock trades at a trailing price-to-earnings (P/E) ratio of 101.37 as of September 2025, far exceeding the European chemical industry average of 19.2xBASF (XTRA:BAS) Stock Valuation, Peer Comparison^[3]. However, this metric is skewed by one-time charges and a recent earnings trough. On a forward basis, the P/E narrows to 14.63, aligning more closely with peers like Air Liquide (P/E of 0.00, due to earnings volatility) and Air Products (23.79)BASF (XTRA:BAS) Stock Valuation, Peer Comparison^[3]. Analysts at SimplyWall St. suggest a fair value of €63.87, implying a 20% upside from Goldman Sachs' €53 targetBASF SE: Target Price Consensus and Analysts^[4].

The price-to-book (P/B) ratio of 1.17 also suggests modest undervaluation relative to industry norms, particularly when compared to Shin-Etsu Chemical's lofty 16.29x P/BBASF (XTRA:BAS) Stock Valuation, Peer Comparison^[3]. This discrepancy reflects BASF's conservative balance sheet and focus on industrial assets over speculative growth plays.

Industry Tailwinds and Strategic Execution

The chemical sector's 2025 outlook is cautiously optimistic. While advanced economies face slowing demand, emerging markets—particularly China—remain a critical growth engine. BASF's Zhanjiang Verbund site in China, despite initial startup costs, is expected to drive long-term margins as production scalesBASF Faces Significant Challenges in Q2 2025 - Globuc^[5]. Meanwhile, the company's pivot toward high-margin segments like agricultural solutions (209% EBITDA growth in Q2 2025) and surface technologies (10.7% growth) demonstrates strategic agilityBASF Faces Significant Challenges in Q2 2025 - Globuc^[5].

Structural challenges persist, however. The Chemicals segment's struggles—driven by overcapacity in petrochemicals and weak industrial demand—highlight the sector's cyclical natureBASF Faces Significant Challenges in Q2 2025 - Globuc^[5]. Yet, BASF's cost-cutting measures and focus on innovation (e.g., sustainable solutions) position it to outperform peers during the next upcycleBASF Faces Significant Challenges in Q2 2025 - Globuc^[5].

Post-Upgrade Investment Sentiment

Goldman Sachs' upgrade has spurred a mixed but generally positive analyst consensus. As of May 2025, 21 analysts cover BASF, with ratings ranging from “Buy” to “Sell”BASF SE: Target Price Consensus and Analysts^[6]. Notably, Morgan Stanley upgraded to “Overweight” in July 2024BASF SE: Target Price Consensus and Analysts^[6], while Jefferies and UBS maintain “Neutral” stancesBASF SE: Target Price Consensus and Analysts^[6]. Institutional investors, including family offices, are also recalibrating portfolios, with increased allocations to public equities and private credit—sectors where BASF's stable cash flows and industrial exposure could appealGoldman Sachs Releases 2025 Family Office Investment Insights Report^[7].

The broader macroeconomic environment further supports the investment case. Central bank easing cycles and declining interest rates are likely to boost industrial demand and asset valuationsAsset Management Outlook 2025: A New Equilibrium^[8]. For BASF, this could translate to improved access to capital and higher multiples as risk appetite returns.

Conclusion: A Calculated Bet on Recovery

Goldman Sachs' “Buy” rating reflects confidence in BASF's ability to navigate a challenging industry landscape and unlock value through operational discipline and strategic focus. While valuation metrics remain mixed, the company's forward-looking metrics, geographic resilience, and cost-saving momentum suggest a compelling risk-reward profile. Investors willing to tolerate near-term volatility may find BASF's undervalued shares an attractive entry point ahead of a potential re-rating in 2025/26.