Shares of Deere and other leading farm machinery stocks are sharply lower Monday after a downbeat note from Piper Jaffray said the current agricultural downtown is likely will persist into 2017.
"We expect that the current ag downturn, which has prolonged for the last three years, will continue into next year, weighing on farmer income and resulting in further declines in farm machinery demand," said Piper Jaffray analyst Brett Wong in a research note.
Shares of Deere ended the day down $2.20 a share, or 2.75 percent, to $77.92. AGCO was down $1.29 a share, or 2.66 percent, to $47.26. U.S.-listed shares of CNH Industrial were down 20 cents, or 2.98 percent, to $6.52.
Piper downgraded shares of Deere, AGCO and CNH to an "underweight" investment rating from "neutral," saying the farm machinery maker stocks have been trading "at elevated multiples, expecting that this year will be trough demand with a recovery next year."
"We believe that overall global farm machinery demand will be down next year, which does not support current expectations for the stocks, and that estimates and valuation multiples are at risk," Wong said.