Deere (NYSE:DE): Fires on all cylinders to bolster smart equipment portfolio

Deere & Company, based in Illinois (NYSE:DE) makes huge investments to increase the application of software and automate agricultural equipment. The company is expected to deploy two revolutionary pieces of equipment this year: autonomous tractors and smart sprayers.

Deere seems optimistic about the contribution of automation initiatives to its revenue growth. According to a WSJ report, the company estimates that 10% of its annual revenue will come from fees charged for using Deere software by the end of the decade.

Additionally, Deere aims to connect its cloud-based John Deere Operations Center to 1.5 million machines already in service and half a billion acres in service by 2026. The move is expected to help create a crop database for better application.

Notably, the company bought Bear Flag Robotics last year for $250 million. This California-based startup was acquired to provide Deere with software to automate older tractors.

Market experts believe that software subscriptions can help this OEM increase its profit margins. This idea was backed up by a 2021 report from Bernstein analysts. According to this report, the average gross margin of equipment sales is expected to reach only 25%, against about 85% forecast by the agricultural software.

Is Deere Stock a good buy?

The OEM could be a good investment option for long-term investors. It’s worth mentioning here that financial bloggers are 90% bullish on DE stocks against the industry average of 67%. The news sentiment is also positive for Deere stocks. Hedge funds also increased their holdings of DE stocks, as they bought 77,600 shares of DE stocks in the last quarter.

Meanwhile, analysts are both cautious and optimistic about Deere’s growth outlook, which commands a moderate buy consensus rating based on 12 buys and five takes.

Final Thoughts

Deere plans to introduce autonomous models across its entire portfolio of equipment by 2030. Additionally, with third quarter fiscal 2022 results, Deere announced that it expects strong order books and positive customer fundamentals support demand for its products in 2023. In addition, DE’s average price forecast of $407.50 suggests upside potential of 9.47% from the level current.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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