|
|
|
|
||
Deere Stock Is on Fire. Wall Street Is Caught in the Headlights.Deere Stock Is on Fire. Wall Street Is Caught in the Headlights.Root, Al.Barron's (Online); New York Shares of ag-equipment giant Deere is on an epic tear . That has delighted investors, but Wall Street isn't sure what to do with Deere stock any longer. Either the ag-cycle will be stronger-for-longer , pushing up Deere earnings, and its stock price, or this is as good as it gets. Wednesday evening, BMO analyst Joss Tiss downgraded Deere (ticker: DE) stock to Hold from Buy, but he kept a price target of $400. With the stock up roughly 40% year to date and 200% over the past year, he thinks it's prudent to take some money off the table. Tiss notes that Deere stock typically trades at 13 times or 14 times peak earnings. Peak earnings are a good way to look at cyclical stock–earnings typically fluctuate more widely than, say, Coca-Cola (KO). Coke demand is more stable than demand for tractors. Deere is trading for about 20 times estimated calendar 2022 earnings of about $19 a share. And corn prices are at near record levels now. That puts cash in farmers' pockets and drives demand for tractors. But corn prices will fall eventually, and Deere profits might moderate when that happens. That makes Deere look a little risky to Tiss. Baird analyst Mig Dobre doesn't see it that way. He rates Deere stock at Buy and raised his price target by $50 a share to $425 on Thursday He says order books are full, and strong demand can continue. "Large [ag-equipment] is benefiting from near-decade-high commodity prices further catalyzing replacement demand," writes Dobre, adding construction demand is strengthening as well. Construction-equipment sales amounted to roughly 30% of total Deere equipment sales in the first fiscal quarter of 2021. For now, the market is siding with Dobre. Deere stock is up about 1.2% in Thursday trading, similar to gains of the S&P 500 and Dow Jones Industrial Average. Analyst peers, overall, side with Dobre, too. About 65% rate share Buy. The average Buy-rating ratio for stocks in the S&P 500 is roughly 55%. That Buy-rating ratio has been stable over recent months. Tiss, in that regard, looks early in his more cautious take. |
return to message board, top of board |