Bank of America double downgraded DOW to "underperform"
Dow Inc (NYSE:DOW) stock is under pressure this morning, down 4.6% at $27.56 before the bell following a rare double downgrade from Bank of America. The firm slashed its rating on the chemical stock to "underperform" from "buy", citing a “perfect storm” of headwinds -- from a softening global economy to rising trade barriers. Alongside the downgrade, the analyst set a price target of $28.
DOW managed a 0.8% gain last week, for its first weekly win in the last six, but the longer-term picture remains bleak. Shares are off 28% year-to-date and have shed 50% over the past 12 months. The 20-day moving average has consistently acted as resistance, and the stock hit a more than five-year low of $25.06 on April 9.
Most analysts are taking a wait-and-see approach. Just three of 17 covering brokerages call DOW a "buy," but with an average 12-month price target of $41.69 -- a 44.4% premium to last night’s close -- there’s plenty of room for downward revisions to roll in.
Options traders could add fuel to the fire if sentiment starts to shift. The equity’s 10-day call/put volume ratio of 4.08 across the ISE, CBOE, and PHLX ranks in the 93rd percentile of annual readings, pointing to a heavy call bias. A reversal in this trend could amplify selling pressure.
That said, Dow stock has a history of exceeding volatility expectations, making it a compelling candidate for premium buyers. Its Schaeffer’s Volatility Scorecard (SVS) sits at 81 out of 100, indicating the equity has consistently delivered bigger moves than options pricing predicted.