Shares of Dow Inc. DOW, +4.98% fell 0.9% in premarket trade Friday, after J.P. Morgan analyst Jeffrey Zekauskas took a bearish stance on the newly-independent materials science company citing relative valuation concerns. Zekauskas initiated coverage with an underweight rating and stock price target of $49, which is 18% below Thursday’s closing price of $59.71, which makes him the only analyst of the 17 covering the company that is bearish, according to FactSet. Dow, which was spun off from DowDuPont Inc. DWDP, +1.15% and became a Dow Jones Industrial Average DJIA, +0.64% component this week. Zekauskas said he believes Dow trades at a premium to its peers, which he sees as LyondellBasel Industries N.V. lyo and Westlake Chemical Corp. WLK, +4.17% because of its larger dividend. “We do not believe that that Dow would maintain its multiple premium versus other North American petrochemical companies were the possibility of a recession meaningful,” Zekauskas wrote in a note to clients. “The risk to the Dow share price is, for this reason, larger than that of the price risk of the other petrochemical companies as Dow could well lose the dividend premium it receives currently.”
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