JPMorgan raises Deere stock price target to $500 from $470

On Monday, JPMorgan analyst Ann Duignan updated the firm’s outlook on Deere (NYSE:DE), increasing the price target to $500 from the previous $470, while keeping a Neutral rating on the shares. The new target represents potential upside from the current price of $465.60, though InvestingPro analysis suggests the stock is currently trading above its Fair Value. Duignan’s assessment suggests that short sellers, who have bet against the stock, may continue to cover their positions in light of recent developments, supported by Deere’s strong 35.5% price return over the past six months.

Deere’s stock performance has been buoyed by several factors, including a substantial aid package for U.S. farmers, amounting to over $30 billion, which is anticipated to boost farm income by approximately 30% year-over-year in 2025. This increase is nearly at par with previous peak levels. With a market capitalization of $126.8 billion and a solid financial health score rated as "GOOD" by InvestingPro, Deere remains a prominent player in the machinery industry. Additionally, there is a growing belief that the U.S. could leverage increased imports of agricultural commodities as a bargaining chip in trade negotiations, particularly with China.

Management teams from agricultural original equipment manufacturers (OEMs), including AGCO, CNH, and Deere, have indicated that 2025 is expected to be the bottom of the current cycle. While analysts anticipate a 25% sales decline for Deere this year, according to InvestingPro data, the company maintains strong fundamentals with a current ratio of 2.1 and 54 consecutive years of dividend payments. This outlook has led to a rally in agricultural OEM stocks, with short sellers reducing their negative positions after a year of pessimism.

Despite forecasts of weak earnings and margins for these OEMs in the first half of 2025, the trend of stock strength is not expected to reverse in the near term. Detractors holding short positions argue that a second-half recovery might be unachievable, but this remains to be seen with more data forthcoming over the next quarter.

Duignan notes that agricultural OEM shares are likely to receive generous multiples on forward estimates, which historically occur at cycle troughs. There is also potential for positive end-of-period commentary this summer, as the effects of the farmer aid package become more tangible with funds reaching accounts in the coming months.

One factor of macroeconomic risk highlighted by Duignan is the proposal by the Congressional Budget Office (CBO) to reduce crop subsidies in the future. Additionally, any new tariffs on imports into the U.S. could cause disruptions, particularly for AGCO if European Union imports are targeted. However, Duignan points out that such risks are not more significant for agricultural OEMs compared to other sectors covered by JPMorgan.

In other recent news, Deere & Co has issued $2 billion in new notes, including $1.25 billion due in 2035 and $750 million due in 2055. The company has entered into an agreement with several underwriters including Barclays (LON:BARC) Capital Inc., BofA Securities, Inc., and Citigroup (NYSE:C) Global Markets Inc. This financial move is expected to provide Deere & Co with additional capital for its strategic initiatives and general corporate purposes.

In the aftermath of strong earnings, DA Davidson has upgraded Deere’s stock target to $505 from the previous $465, maintaining a Buy rating. The company’s effective inventory management and robust EBITDA margins were highlighted as key factors for this positive outlook.

Despite a decline in net sales and revenues for fiscal year 2024, Deere & Co reported a net income of $7.1 billion, with earnings of $25.62 per diluted share. However, the company expects a continued market contraction with a net income forecast of $5-5.5 billion for fiscal year 2025. These are among the recent developments concerning Deere & Co.

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