Rothschild & Co Redburn’s Surprising ‘Buy’ on a Chemical Giant in Turmoil

Dow Inc. (DOW), a global leader in commodity chemicals, has just received a high-profile upgrade from Rothschild & Co Redburn. The analyst firm shifted its stance from “Neutral” to “Buy” and set an ambitious $40 price target—almost double the current share price of $21.91. This decisive call lands in the midst of pronounced volatility, dividend upheaval, and legal scrutiny, putting Dow squarely in the sights of value-oriented and contrarian investors alike.

Why does this matter? Analyst upgrades, especially from influential global firms like Rothschild & Co Redburn, often act as catalysts for institutional flows and signal that the smart money is starting to see deep value where the market sees distress.

Key Takeaways

• Potential Upside: Rothschild & Co Redburn’s $40 target implies an 82.6% potential return from current levels.

• Stock Plunge & Volatility: DOW has crashed to its lowest level since 2019, with a sharp 17.5% drop following a dividend cut and weak earnings.

• Dividend Cut & Legal Concerns: Recent headlines highlight a 50% dividend slash and a class action law firm circling the company, amplifying uncertainty.

• Analyst Firm Clout: Rothschild & Co Redburn, known for deep value calls and sector expertise, is signaling conviction despite market pessimism.

• Technical Picture: The recent RSI is extremely oversold at 25.7, suggesting capitulation and possible rebound risk.

Rothschild & Co Redburn’s Upgrade: A Vote of Confidence in Crisis

Who Is Rothschild & Co Redburn, and Why Does Their Call Matter?

Rothschild & Co Redburn is the equities research arm of one of Europe’s most storied investment banks, renowned for its rigorous, contrarian research and a global institutional client base. Their upgrades tend to move markets, particularly in out-of-favor sectors. This “Buy” rating and $40 target for DOW is not just a price call—it’s a statement that the firm sees value far beyond current consensus.

What Changed? From ‘Neutral’ to ‘Buy’

• Previous Rating: Neutral

• New Rating: Buy

• Current Price Target: $40 (no previous target disclosed)

• Current Price: $21.91 (pre-market, August 5, 2025)

The $40 target sets a high bar, implying a massive re-rating of Dow’s prospects despite recent turbulence.

Stock and Financial Performance: Pain, Capitulation, and a Potential Pivot

One-Year Price Action: From Stability to Freefall

Dow Inc. traded as high as $55.67 in late September 2024 but has since unraveled, reaching a new low of $21.31 on August 4, 2025. The stock is down over 60% from its 52-week high and is trading well below both its 20-day EMA ($25.58) and SMA ($26.66), painting a clear picture of technical breakdown and extreme pessimism.

• Recent RSI: 25.7 (deeply oversold)

• Average Daily Volatility: ~0.97%, with volume spiking as the sell-off accelerated

• Daily % Change (avg.): -0.32%, signaling a persistent negative drift

Financials: Dividends Slashed, But Is Value Emerging?

Recent headlines confirm a dramatic 50% dividend cut after disappointing earnings. Dow was previously the highest-yielding stock in the S&P 500—a magnet for income investors. While the yield has halved, free cash flow preservation could set the stage for future capital deployment or even opportunistic buybacks.

News Flow: Legal Scrutiny and Deep Value Debate

• Dividend Cut & Earnings Miss (July 24, 2025): Triggered a 17.5% single-day drop, as reported by The Motley Fool.

• Legal Investigation (August 1, 2025): Pomerantz LLP announced it is investigating claims on behalf of investors, adding to headline risk.

• Value Case (August 4, 2025): Analysts from The Motley Fool and other outlets argue that Dow’s valuation is now compelling, even as sentiment collapses.

“Dow has now surpassed its intraday low from the worst of the COVID-19 sell-off in March 2020.” — The Motley Fool, August 4, 2025

The Case for Potential Upside: 82.6% and the Anatomy of a Deep Value Reversal

Valuation Perspective

With shares at $21.91 and a target at $40, the implied upside is a staggering 82.6%. This is not a modest re-rating; it’s a conviction call that Dow is trading far below intrinsic value, even after accounting for deteriorating near-term fundamentals.

Contrarian Sentiment: Where Capitulation Meets Opportunity

• Oversold Conditions: RSI below 30 signals rare levels of pessimism.

• Volume Surge: Highest trading volume on July 24 suggests forced liquidations and possible capitulation.

• Mean Reversion Potential: Dow now trades below both its lower Bollinger Band (currently $20.72) and long-term volume-weighted average price ($35.45), indicating severe undervaluation by historical standards.

Risks to the Thesis

• Legal Uncertainty: Class action risks and regulatory scrutiny could weigh on sentiment and capital allocation.

• Fundamental Deterioration: Persistent weakness in commodity chemical demand or further dividend reductions could challenge the bull case.

• Sector-Specific Headwinds: Global demand for chemicals remains cyclical and exposed to macro shocks.

Recent News & Expert Perspectives: Distress, But Not Without Hope

Dividend Cut: A Poison Pill or a Reset Button?

Dow’s decision to halve its dividend removed a major support for the stock price, but may also preserve cash for a strategic reset. The market’s violent reaction could have overshot the fundamentals.

“The surprising reason why [Dow] could be a buy now.” — The Motley Fool, August 1, 2025

Legal Clouds

The announcement of a class action investigation further rattled investors, but such probes are not uncommon after large drawdowns and may not materially impact long-term value, depending on the outcome.

Value Investors Take Note

Contrarian analysts and deep value managers are starting to circle DOW, with some arguing that the current price more than discounts near-term pain.

What to Watch Going Forward

• Earnings Stabilization: Signs of margin stabilization or demand recovery will be key to validating the upgrade.

• Resolution of Legal Issues: Any clarity on the legal front could prompt a relief rally.

• Insider Buying or Activist Involvement: Such moves could further support the deep value thesis.

Conclusion: Is Dow a Classic Deep Value Trap or a Turnaround Play?

Rothschild & Co Redburn’s buy call and aggressive $40 price target place Dow Inc. at a critical inflection point. The stock is battered, sentiment is toxic, and headline risk is high—but so too is the potential upside for those willing to take the other side of consensus. The coming quarters will reveal whether Dow can execute a turnaround or if the distress will deepen. For investors, this is a quintessential deep value setup: high risk, high reward, and a test of conviction against the crowd.