Deutsche Bank analysts raised DuPont (NYSE:DD) to Buy from Hold, increasing the price target on the stock to $80 from $70 in a note to clients Monday.
The analysts said in the memo that they are upgrading the stock following their meetings with management. In addition, they noted that DuPont's shares now trade at a 50% discount to its peers.
"There are two primary reasons for this discount," wrote the analysts. They stated the first was the large amount of M&A activity, and the "massive portfolio change since the merger of DuPont and Dow was announced in 2015."
"This large amount of M&A and portfolio change has resulted in some investors choosing not to spend their time looking at DuPont. The good news is that on the Q1 earnings call (and reiterated on our NDR with the company last week), management stated they are done with M&A and portfolio change for at least the next year, with any extra cash to be used for share buybacks," the analysts stated.
The second reason for DuPont's valuation discount, they said, is its potential PFAS exposure.
"This exposure is primarily due to its inclusion in a multi-district litigation in federal court in South Carolina involving the use of PFAS-containing fire-fighting foams manufactured by 3M," explained the analysts.
"On the Q1 earnings call, DuPont stated it was talking regularly with the plaintiffs and the mediator and that it was "feeling positive" on a settlement."