Celanese Corporation (CE): A Bear Case Theory

We came across a bearish thesis on Celanese Corporation (CE) on Value Investing Subreddit Page by Rdw72777. In this article, we will summarize the bears’ thesis on CE. Celanese Corporation (CE)’s share was trading at $52.61 as of Feb 20^th. CE’s trailing and forward P/E were 7.36 and 6.34 respectively according to Yahoo Finance.

Celanese has seen a sharp 23% decline in its stock price, now trading at $54, following a disappointing earnings guidance for FY25. The company also recorded a $1.6 billion impairment charge on Zytel, a product acquired in its $11 billion DuPont acquisition less than three years ago. This raises concerns about the long-term value of its acquisitions, and further, albeit smaller, impairments are expected in future quarters. The company is facing headwinds on multiple fronts, with declining volumes, lower pricing, and unfavorable currency movements, all of which have contributed to its weak outlook. Like many chemical businesses, Celanese has cited destocking as a temporary issue, with expectations of a volume rebound in Q2, but such optimism may be misplaced, particularly given the company’s exposure to the automotive sector, which remains uncertain.

With a market cap of approximately $6 billion and long-term debt of $11 billion, Celanese’s financial position remains strained. Its free cash flow for 2024 was $500 million, which, given the company’s leverage, does little to alleviate concerns over its balance sheet. Despite the sharp decline in stock price, the fundamental outlook remains bleak. The combination of weak earnings guidance, ongoing impairments, and questionable recovery prospects suggests that the stock remains a strong sell even after its recent plunge. The chemical industry’s cyclical nature and the company’s reliance on an uncertain demand recovery make it difficult to justify an investment in Celanese at this stage.

Celanese Corporation (CE) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 35 hedge fund portfolios held CE at the end of the third quarter which was 15 in the previous quarter. While we acknowledge the risk and potential of CE as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than CE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.