Why Investors Drove Dow Stock Higher Today

An analyst's price-target raise brightened the outlook on beaten-down chemical stock Dow (NYSE: DOW) on Monday. The company's shares enjoyed a nearly 4% gain on the day as a result, easily eclipsing the 1.2% advance of the S&P 500 index across that trading session.

A pundit gets cautiously more positive

That adjustment, made by Deutsche Bank's David Begleiter, was enacted before market open that day. Begleiter now feels that Dow is worth $26 per share, quite some distance above his previous estimation of $22. That didn't change his outlook on the stock, however, as he maintained his hold recommendation.

Image source: Getty Images.

The reasoning behind Begleiter's price-target raise wasn't immediately clear. What is apparent is that Dow is a stock that's fallen well out of favor with the market -- so far this year it's lost nearly 36% of its value in a generally bullish environment for equities. By contrast, the S&P 500 index has largely moved higher since the middle of the year and year to date has posted an almost 17% gain.

Dow has numerous challenges it's contending with these days, not least of which is the sluggish demand for chemicals on the global market. This is due to a number of factors, including but certainly not limited to overcapacity and the negative effects of geopolitical developments.

Waiting for an unswing

Dow is a classic American industrial, so there are certainly investors out there who are capitalizing on a relatively low stock price to take advantage of an eventual upswing in the cyclical chemical sector. While the industry is sure to recover at some point, investors might have to be patient for the more lingering negative factors to play themselves out.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.