Dow Inc. (DOW): A Bull Case Theory

We came across a bullish thesis on Dow Inc. on Quipus Capital’s Substack. In this article, we will summarize the bulls’ thesis on DOW. Dow Inc.'s share was trading at $23.86 as of December 2nd. DOW’s trailing and forward P/E were 32.65 and 13.61 respectively according to Yahoo Finance.

Dow Inc. (DOW), restructured after its 2019 de-merger from DowDuPont, operates as a major global commodity chemical producer with a portfolio centered on olefins and polyolefins. The company’s asset base is heavily concentrated in the U.S. (about 75%), with significant exposure to export markets, particularly EMEA and India.

Like LyondellBasell, Dow’s core profitability stems from olefins and polyolefins, though its higher olefin exposure gives it more sensitivity to global trade dynamics. Its Intermediates segment, including propylene oxide and ethylene oxide chains, is smaller than peers, limiting exposure to construction and vehicle fuels.

Despite this, Dow maintains profitable specialty lines such as acrylic binders and silicones, offering modest diversification. Management’s disciplined, countercyclical capital allocation strategy—investing more in downturns and less during high-margin cycles—demonstrates an understanding of chemical industry cyclicality. However, the company’s financial flexibility remains constrained. While its debt maturity profile is manageable and borrowing costs low, liquidity pressures persist due to an oversized dividend and limited operating cash flow coverage.

Dow’s annual EBITDA of roughly $2.5–$3 billion is insufficient to fund both capex and interest expenses sustainably, forcing reliance on asset sales, including a recent $3 billion partial divestiture of U.S. midstream assets. Although these moves have strengthened liquidity to $4.6 billion, further dividend reductions appear necessary.

Beyond leverage, Dow faces substantial environmental and pension liabilities, adding to structural risk. In an optimistic scenario, with $4.2 billion in EBIT and $2.6 billion in net income, Dow trades at roughly 6x earnings, suggesting modest upside amid cyclical and balance sheet challenges.

Previously we covered a bullish thesis on Eastman Chemical Company (EMN) by Necessary-Damage5658 in November 2024, which highlighted its advantage from export control changes favoring compliant suppliers. The company’s stock price has depreciated approximately by 39.66% since our coverage as the thesis didn’t play out. The thesis still stands as Quipus Capital shares a similar but emphasizes Dow’s cyclical positioning and capital discipline.

Dow Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 40 hedge fund portfolios held DOW at the end of the second quarter which was 43 in the previous quarter. While we acknowledge the risk and potential of DOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DOW and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.