DuPont Can Grow to $58 on Fundamentals Despite Macro Sell Off

DuPont (NYSE:DD) like most other stocks has taken a thumping in recent months despite positive news flow. The stock has proved more resilient than many of its peers such as Dow Chemicals (NYSE:DOW), which has lost nearly 30% during the last 3 months while DuPont has shed 20%. We believe that concerns over the European debt crisis and U.S. growth worries led to its slump, which is leading to a broader equity market sell-off rather than any deterioration in the company’s fundamentals. DuPont competes with other major chemical & agricultural companies such as Dow Chemicals, 3M (NYSE:MMM), Monsanto (NYSE:MON), Syngenta and BASF.

Our current price estimate for DuPont stands at $58.40, which is about 30% above its current market price.

Sliding Investor Confidence Drags on Shares

State Street Investor Confidence Index measures investors “attitude” toward to risk and indicates global investor confidence stood near its 12-month low at 89.6 points in August 2011, a massive drop of 12.9 points from 102.5 points in July. North America witnessed the largest drop of 13.9 points in investor confidence in August.

The Center for European Economic Research reported that German investor confidence has also plummeted dramatically to its 2 1/2 year low in September because of ongoing European debt crises. ^[1] The primary cause for the declining investor confidence is deteriorating global economic environment due to worsening European sovereign debt crisis, rising concerns over U.S. economic growth and inflationary pressures in many developing economies. We expect that investor confidence will remain low until market concerns subside, causing increased volatility in stock prices in the near term.

Positive Developments Help in the Meantime

DuPont recently announced at the Credit Suisse Chemicals & Ag Conference that its seed business, Pioneer Hi-Bred, added market share in the North American corn and soybean markets. ^[2] DuPont has also recently received approvals for new products – Optimum AcreMax and Optimum AcreMax Xtra, which will expand the company’s offerings of new insect protection solutions for farmers.

DuPont’s continued focus to leverage new research facilities for product innovation, global expansion, and supply chain management to ensure full product availability will help the company continue expanding its market share in agriculture and nutrition based products over the mid-term.

You can drag the trend lines in the modifiable chart above to see the impact of these trends on DuPont’s stock value.

See our full analysis for DuPont’ Stock.

1. Center for European Economic Research: ZEW Indicator of Economic Sentiment – Expectations Continue to Decline [↩]
2. DuPont Seed Business Gains Corn, Soybeans Share in North America for 2011 [↩]