By Sam Boughedda
Dow (NYSE:DOW) was lifted to Buy from Hold, with a price target of $60 per share by Deutsche Bank analysts on Monday.
They explained the firm is now upgrading the stock as the worst is behind or close to being behind the company, and the plethora of investment positives far outweigh the investment negatives at this time.
The analysts added that it is based on an attractive entry point, the Ethylene cost advantage being very strong, Dow being highly levered to China's recovery, and the fact that integrated margins are bottoming.
"Dow's shares are down 14% over the past 2 weeks and 17% over the past month (S&P down 3% and 5%, respectively). Dow's shares are also down 30% from their high last May (S&P down 9%). As such, we believe Dow's current share price of $50 is an attractive entry point," wrote analysts.
Meanwhile, they believe that with an oil-to-gas ratio of 31x, the U.S. ethylene cost advantage is the strongest it has been since 2013, and Dow is well positioned to benefit compared to naphtha-based producers in Europe and Asia.
"China is a key market for US polyethylene exports," continued analysts. "Dow is highly levered to a China recovery as it would increase US polyethylene exports and lead to a more balanced US market."