DuPont shares slide after Barclays downgrade on valuation, breakup concerns

Investing.com -- Shares of DuPont de Nemours (NYSE:DD) slid lower to 2.9% in pre-market trading on Monday after Barclays (LON:BARC) downgraded the stock to "underweight" from "equal weight." 

Barclays analysts expressed concern over the company's valuation, which they believe has reached full value following recent market optimism. 

They flagged that DuPont’s shares have climbed to multi-year highs, but warned that the next few quarters could bring increased uncertainty. 

This, combined with limited stock buyback support and heightened market volatility, positions DuPont for potential underperformance.

One of the main drivers behind the downgrade is DuPont's planned breakup into three separate entities.

Barclays analysts argue that while many bulls expect the company's divisions—particularly the Water and Electronics units—to command high valuations post-breakup, there is skepticism around whether DuPont's remaining core businesses, known as RemainCo, will re-rate to higher multiples. 

This is especially concerning as RemainCo, which encompasses more cyclical and industrial sectors, could struggle amid broader market uncertainties.

Barclays analysts further noted that the company's fundamentals remain "choppy," particularly in sectors such as Electronics and broader industrials, which are grappling with slowing growth. 

The analysts also cited concerns regarding DuPont’s cash conversion rates, PFAS liabilities, and potential dis-synergies as the company moves forward with its split.

The analysts added that while DuPont’s leadership transition—specifically the shift of longtime CEO into the role of Executive Chairman—has generally been well-received by investors, it leaves open questions about how new management will perform, particularly as the company navigates the complexities of its multifaceted separation.

Adding to this, Barclays lowered its price target for DuPont to $84 from $88, representing around a 4% downside from its previous price. 

The analysts remain cautious about the company’s ability to generate significant equity upside, especially as investors await more details regarding the spin-off and leadership transitions in the coming months.