Deere Stock in Headlights of Another Correction By TipRanks
Shares of agricultural machinery kingpin Deere (NYSE:) are flirting with correction territory once again, continuing the excessive volatility in what’s been nothing short of a turbulent second half.
Deere stock has not seen a significant decline in value despite recent volatility. It is up nearly 100% over its pre-pandemic peak price and multiyear consolidation price around $177/change.
Deere stock is in the middle of yet another correction. Investors might want to stay away from the potential “double-top” technical pattern. Deere stock might plunge to bear market territory, if this happens.
Deere stock is high quality and tech-savvy, so it should be grabbed if there’s a significant decline.
Even though the price of the stock has fallen to 2.6 times sales, and 20.6 times earnings trailing, it is not that high, particularly considering Deere’s likely role in farming moving into the new technological age.
Deere is a stock I believe in, even if the stock falls 20% from its peak. (See DE stock charts on TipRanks)
More than Heavy-Duty Agricultural Equipment Manufacturer
Despite Deere’s incredible 2020 run, the stock isn’t nearly as frothy as you’d think, given the incredible (and improving) fundamentals.
This company is well-known for its strong financial position, which warrants an expensive price. After all, it is difficult to enter the farming equipment business. However, due to the nature of farming equipment’s cycles, it is worth a little discount. If you buy cyclical stocks at the wrong times of a cycle, then you might be facing steep losses.
Deere’s most recent quarter (fiscal Q3) witnessed Equipment Operations sales increase 32% over the previous year. The demand for durable, large-ticket goods, especially in light of the fact that we still have a long way to go before the recession, was impressive.
While sales momentum may slow down as we enter the middle-to-late stages the current economic cycle’s second phase, I believe Deere stock will not be subject to another long period of inactivity or steep sell-offs of 70-75% like 2008, which could result in significant declines in the overall economy. This is why.
Deere might be shifting to a more tech-focused company and less to a discretionary business. Cathie, an forward-thinking manager of money, seems to consider Deere a promising tech innovator.
Wood views Deere highly, something that most investors might dismiss as boring and repetitive. It’s hard to see why Deere would want to be part of an ETF that is focused on innovation. However, if you look at the inside of the stock it is clear that Wood might be correct about the money.
Deere leverages technology in ways that can save farmers huge amounts of money long term. Deere is determined to take agriculture forward, whether we are talking about customized spraying or seed placement guiding system, as well as autonomous tractor technology.
Wall Street’s Take
According to TipRanks’ consensus analyst rating, DE stock comes in as a Moderate Buy. Three Buy recommendations are available, along with one Hold recommendation and one sell recommendation.
The average DE price target is $407.20. Price targets for analysts range from $346 to $442 per ounce.
Disclosure: Joey Frenette holds no positions in any stock mentioned at publication.
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