Deere’s Tech Transformation: Why $655 a Share is Increasingly Likely
The agricultural landscape is undergoing a quiet revolution, and Deere & Company (DE) isn’t just participating – it’s leading the charge. While commodity price volatility continues to challenge the sector, Deere’s strategic pivot towards precision agriculture and autonomous technology is reshaping its financial outlook and investor perception. Recent analysis suggests the stock could reach $655 by October 2028, a 27% upside from its current $514 price tag, fueled by structural improvements and a rapidly evolving business model.
Resilience in a Downturn: Deere’s New Foundation
Despite a 30% decline in the North American large agricultural industry in fiscal 2025, Deere delivered a remarkable $5 billion in net income. This resilience isn’t accidental. The company achieved 12.6% equipment operations margins – a significant 4.5 percentage point improvement over comparable figures from 2016. This demonstrates a fundamental shift in Deere’s profitability, less reliant on cyclical booms and busts.
A key indicator of this strength is inventory management. New field inventory for 220+ horsepower tractors ended fiscal 2025 at its lowest level in over 17 years. Simultaneously, used inventory is shrinking, with model year ’22 and ’23 8R tractors down 25% from peak levels in March 2025. This tightening supply, coupled with growing demand for advanced technologies, positions Deere favorably.
The Rise of Precision Agriculture and Autonomous Systems
Deere’s transformation isn’t just about weathering the storm; it’s about building a future-proof business. Technology adoption is accelerating across the board. Over 24,000 Precision Essentials retrofit kits have been ordered, allowing farmers to upgrade existing equipment with cutting-edge capabilities. Furthermore, 8,000 JDLink Boost satellite connectivity units are now in use, providing valuable data insights for optimized farming practices. This is more than just incremental improvement; it’s a fundamental change in how agriculture operates.
The impact of “See & Spray” technology is particularly noteworthy. Covering 5 million acres in 2025, it’s already delivering a 50% reduction in herbicide usage – a win for both farmers’ bottom lines and environmental sustainability. Autonomous tillage is also gaining traction, surpassing 200,000 acres in 2025, signaling a growing acceptance of robotic solutions in the field.
Financial Projections and Valuation
Based on a projected 7.4% annual revenue growth and 15.8% operating margins, analysts at TIKR estimate Deere’s stock will reach $655 within 2.8 years. This projection assumes a 25x price-to-earnings multiple, a slight contraction from the current 30.9x, acknowledging potential cyclical headwinds. However, the core argument rests on Deere’s structural margin improvements and the creation of recurring revenue streams through technology solutions.
Even with a projected $1.2 billion tariff headwind in 2026, Deere is demonstrating its ability to manage costs and maintain profitability. Pricing actions (expected to realize 1.5%) and material cost reductions are expected to offset the impact, resulting in a price/cost positive outcome for the year. This proactive approach underscores the company’s operational efficiency and strategic foresight.
Understanding the Valuation Model
TIKR’s valuation model highlights the key drivers of Deere’s potential growth. Revenue growth is expected to be fueled by stabilization in large agriculture, a recovery in small agriculture & turf, and continued expansion in construction & forestry. Crucially, technology expansion – particularly See & Spray and autonomous tillage – is expected to play a significant role.
The model also considers different scenarios. A “low case” scenario, with 7.2% revenue growth, still projects a 25% total return. A “high case,” with 8.8% growth driven by faster technology adoption and a quicker recovery in large agriculture, could yield an impressive 86.6% total return. This range demonstrates the potential upside while acknowledging the inherent uncertainties in the agricultural market.
Want to build your own valuation model? TIKR’s free tool allows you to plug in your own assumptions and see how different scenarios impact potential returns.
Beyond the Numbers: The Long-Term Implications
Deere’s evolution is a case study in successful corporate transformation. It’s no longer simply an equipment manufacturer; it’s a technology provider, a data analytics company, and a solutions provider for the entire agricultural ecosystem. This shift has significant implications for the industry as a whole. Farmers are increasingly relying on data-driven insights to optimize their operations, reduce costs, and improve yields.
The increasing adoption of autonomous technologies also has the potential to address labor shortages and improve efficiency. As these technologies mature and become more affordable, they are likely to become increasingly prevalent on farms of all sizes. The USDA provides further insights into the challenges and trends in farm labor.
What does this mean for investors? Deere is well-positioned to capitalize on these trends, and its stock offers a compelling opportunity for long-term growth. The company’s strong financial performance, coupled with its commitment to innovation, makes it a standout player in the agricultural technology space.
What are your thoughts on the future of agricultural technology? Share your predictions in the comments below!
