Dow Target Cut 45% to $28

Dow Target Cut 45% to $28

RBC Capital Markets downgraded Dow Inc. (ticker DOW) from Outperform to Sector Perform and reduced its 12‑month price target from $51 to $28, a 45 % decline. The brokerage attributed the recent rally in Dow’s shares to temporary polyethylene price gains stemming from supply disruptions linked to the Iran conflict, which it expects to be short‑lived.

RBC revised its adjusted EBITDA forecasts for Dow, lowering the 2026 estimate to $5.30 billion and the 2027 estimate to $5.10 billion, down from prior expectations of $6.0 billion and $6.5 billion respectively. The $28 price target is based on a multiple of 6.0× the projected 2026 EBITDA.

The firm highlighted the Alberta cracker project as a major cash‑flow overhang. RBC estimates gross capital spending of about $7.5 billion, or roughly $6 billion after government incentives, which will consume the bulk of Dow’s free cash flow through 2030. Although Dow has delayed the Alberta project, idled European assets, monetised infrastructure and halved its dividend to preserve cash, the elevated capital spending and weaker dividend profile diminish the likelihood of a higher valuation multiple.

RBC expects the company’s cost‑cutting programme to generate approximately $1.6 billion of cumulative savings, but judges that these savings will not fully offset the impact of weak demand and persistent industry overcapacity. The brokerage noted that higher prices and feedstock disruptions have not led to permanent plant closures in Europe and Asia; instead, increased Chinese exports and coal‑to‑olefins production have kept supply elevated, raising the risk that earnings could revert toward 2024 levels once current pricing support fades.

RBC compared Dow with peer LyondellBasell, stating that LyondellBasell is better positioned to return capital to shareholders because its major investment cycle is largely complete.