If you’re looking for growth in the second half of the year, analysts pointed to a surprising corner of the market this week: farming stocks.
On Monday, Baird analyst Mig Dobre upgraded Deere (NYSE: DE) to Outperform, boosting his price target from $160 to $189.
“The past three months have provided ample data points showing consumer behavior shift post-COVID with demand for home-related durables and small ag proving remarkably resilient,” Dobre wrote in a note.
Dobre added that consumer demand for Deere’s riding lawn mowers is a positive for the stock, but said he also sees better trends in the company’s core large agricultural equipment business. “Burgeoning replacement demand partially offsets COVID [and] ethanol shock,” Dobre said.
Fairlead Strategies founder Katie Stockton also likes Deere and said this week that the stock should be in for more gains.
“We could see upside follow through here in the near term,” Stockton said. “Momentum certainly supports it.”
“However, I would note that Deere is really a long-term underperformed,” Stockton cautioned. “The chart has been range bound for really years now, and it puts very significant resistance around $180, so that’s a very big hurdle for Deere. There’s good room between here and there, so that supports upside follow through, but I think it will be challenged near those highs.”
Apart from Deere, Bank of America analyst Steve Byrne double-upgraded three crop-input stocks from Sell to the equivalent of Buy this week: CF Industries (NYSE: CF), Corteva (NYSE: CTVA), and Nutrien (NYSE: NTR).
While fertilizer stocks Nutrien and CF are down substantially this year, -30% and -37%, respectively, Byrne said that fertilizer demand is improving in India and Brazil, which is good news for the stocks. Byrne also noted that there are concerns about a corn deficit in China, which could mean more business for U.S. producers as the country is a dominant producer of corn globally.