Jefferies on Monday upgraded Dow Chemical and DuPont to buy from hold, saying investors might be underestimating the synergy benefits from the proposed merger between the two industrial giants.
"If Dow-DuPont had kept up with market multiple expansion since right before the merger was announced, the shares would trade 7%-10% higher than Friday's close," equity analyst Laurence Alexander wrote in a research note.
The analyst said most macro data is similar or better than when the merger was announced in December 2015, given a potential revival in industrial manufacturing in the United States under President Donald Trump.
The merger is expected to close this year.
"With the merger likely to close in the near-term (90% chance, in our view), we believe Dow-DuPont will have an opportunity to show how scale creates optionality," Alexander said.