Wall Street Concerned About Deere as Agriculture Industry Faces Challenges

An Analyst Downgrades Deere Stock, Citing Multiple Issues

Wall Street’s optimism towards agricultural-equipment manufacturer, Deere, has been wavering recently due to three key factors.

In a recent development, Canaccord analyst Robert Burleson downgraded Deere stock (ticker: DE) from Buy to Hold, while also reducing the price target from $530 to $400.

Burleson points out that the industry is gradually recovering from the supply-chain disruptions caused by the Covid-19 pandemic and the high crop prices that characterized the past year.

1. Equipment Inventories on the Rise

One of the concerns highlighted is the increasing inventories of equipment among dealers. This phenomenon creates a challenge as it results in fewer orders for new equipment from dealers to Deere. Furthermore, improved supply makes it difficult for Deere to raise prices effectively.

2. Weakening Crop Prices

Another issue impacting Deere’s prospects is the decline in crop prices. For example, corn prices have witnessed a significant drop of approximately 31% over the past 12 months. The decline in food-commodity prices adds pressure on farm incomes, ultimately leading farmers to cut back on their investments in new equipment.

Amidst these challenges, Deere stock experienced a 1.7% decline in midday Friday trading, contrary to the upward movement seen in the S&P 500 and Dow Jones Industrial Average, which were up by 0.4% and 0.1%, respectively.

This downgrade signifies the second within a week and the fourth over the past few months, based on data from FactSet. Presently, around 58% of analysts covering Deere stock maintain a Buy rating. This figure represents a decline compared to the end of June when 73% of analysts had given the stock a Buy rating. Notably, the average Buy-rating ratio for stocks in the S&P 500 stands at approximately 55%.

Deere Stock: Analyst Price Target and Market Performance

A Less Severe Cyclical Downturn

Market Performance Comparison

Attractive Valuation

It is fascinating to observe how Deere, a company deeply rooted in the agricultural industry, navigates fluctuating market conditions. For more information, please visit the Dow Jones website.