Deere Stock Hits All-Time High on 2026 Trough Call; We Maintain WAIT on Unresolved Tariff and Legal Risks

What happened

Deere's stock hit an all-time high this week after CEO John May reiterated that 2026 will mark the bottom of the current agriculture equipment cycle and the company raised its full-year net income guidance. The rally extends the stock above the level ($630) at which the DeepValue master report had previously advised trimming, with shares now pricing in a sharp earnings recovery rather than the gradual stabilization modeled in our base case. However, the master report's core caution remains: Q1 FY26 direct tariff costs of $361M compressed gross margin, and the next quarterly update has yet to confirm whether those costs are contained or offset by IEEPA tariff relief. Additionally, the FTC/state right-to-repair case continues to progress beyond motion to dismiss, and the class settlement's 10-year tool access commitment poses a structural risk to Deere's aftermarket service capture that is not resolved by cycle bottom calls. While the CEO's confidence in a 2026 trough is notable, it is a qualitative statement that does not change the quantitative evidence of margin pressure from tariffs or the legal overhang on repair economics, and the current valuation (P/E above 32 at $577, higher at all-time high) leaves no margin of safety if those risks materialize.

Implication

Investors should treat the all-time high as a sentiment-driven inflection rather than a fundamental one, as the CEO's cycle-bottom comment is not backed by new data on tariff costs or legal outcomes. The next 10-Q, expected by early November, must show direct tariff costs at or below the Q1 FY26 baseline of $361M and provide clarity on IEEPA recovery payments to validate the margin recovery embedded in the higher guidance. Until then, the stock is likely to remain volatile given the unresolved right-to-repair case, where a structural remedy could reduce aftermarket economics and challenge the long-term moat of Deere's service business. For existing holders, the master report's trim level of $630 remains a rational point to reduce exposure and lock in gains, while the attractive entry zone of $520−$580 offers a better risk-adjusted basis if a pullback occurs. Only a sustained tariff cost decline and a favorable legal resolution would justify upgrading from WAIT to a positive stance, as those would de-risk the earnings reset scenario and support the higher valuation.

Thesis delta

The CEO's cycle-bottom assertion does not change our fundamental thesis, as it does not address the quantified tariff costs ($361M in Q1) or the FTC/state right-to-repair case that remain the key swing factors for margin durability. However, the raised guidance indicates management's execution on cost controls and mix is tracking better than prior expectations, which modestly increases the probability of the bull scenario ($640 implied value) if tariff relief materializes. We maintain our WAIT rating but will reassess promptly if the next 10-Q shows tariff costs at or below baseline and the legal track shows containment.