Should you buy DuPont stock at 2-year highs?

By:
on May 20, 2024
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  • DuPont hits 2-year high near $80, backed by strong fundamentals.
  • Jefferies upgrades to 'Buy'.
  • Stock poised to break $85 barrier, bullish momentum.

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DuPont de Nemours Inc (NYSE:DD) has been capturing attention in the market as its shares have soared to a two-year high, nearing the $80 mark as of May 20th. This surge in valuation isn’t arbitrary; it’s backed by solid fundamentals and strategic moves by the company.

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In the first quarter of 2024, DuPont exceeded expectations, with non-GAAP EPS of $0.79, surpassing estimates by $0.14. Despite a slight dip in year-over-year revenue, down 3.3% to $2.9 billion, the company demonstrated strong cash flow generation. Operating activities from continuing operations yielded $493 million, with adjusted free cash flow reaching $286 million.

Amidst these financial triumphs, market sentiment towards DuPont has been notably bullish, with notable institutions like Jefferies upgrading the stock to a ‘Buy’ rating recently. Jefferies analyst Laurence Alexander’s optimistic outlook hinges on several key factors, including an anticipated recovery in DuPont’s end markets, particularly in the electronics and industrial sectors. He anticipates a structural improvement in margins and free cash flow generation, driven by a new operating culture within the company.

While DuPont’s valuation metrics measured by PE or EV-to-sales ratio may indicate premium prices relative to its peers, according to analysts its solid fundamentals and growth outlook justify these figures. Recent acquisitions, such as the Spectrum acquisition, have expanded DuPont’s portfolio, positioning it for continued growth and value creation. With raised guidance for net sales, operating EBITDA, and adjusted EPS for the full year 2024, DuPont appears poised to capitalize on emerging opportunities in key markets.

To gain deeper insights into DuPont’s stock future trajectory, it’s crucial to analyze its chart patterns and technical indicators. These insights can provide us with valuable guidance on potential price movements and trading opportunities. So, let’s take a look at the charts to further understand DuPont’s near-term outlook.

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DuPont’s stock made its all-time high near the $110 level back in January 2018 as can be seen on its daily charts. After making that high the stock retraced below $100 and entered an aggressive downtrend starting in August 2018 that lasted until March 2020 and took it below $30.

DD chart by TradingView

Though the stock bounced back rapidly in the next few months, it found it hard to break above $85. Despite several attempts to cross above it in the last 3 years, DuPont’s stock hasn’t been able to do so. However, with the aggressive bullish momentum it has shown since February this year, it might be on the verge of finally breaking above that barrier with both medium-term and long-term indicators being deep in green currently.

Investors who want to buy the stock at current levels near $80 can do so while keeping a stop loss below the recent swing low at $72.40 and a profit target of $108. Traders who are bearish on the stock can also initiate a short position at current levels considering the stock is trading near and below its strong resistance level. They can short the stock with a stop loss of $86.2 and a profit target of $64.25.

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