Dj Dnow Price Target Maintained With A $18.00/Share By Stifel

What Happened?

Shares of energy and industrial distributor DNOW jumped 8.7% in the afternoon session after Susquehanna upgraded its rating on the stock to Positive from Neutral. 

The firm set a price target of $16.00 for the company. The upgrade followed the completion of the MRC acquisition. According to the analyst, the deal positioned Now Inc. as a "more formidable energy and industrials solutions provider." This was due to a broader and more diversified range of product offerings in its main markets, which gave the firm a stronger competitive footing.

The shares closed the day at $13.35, up 7.4% from previous close.

Is now the time to buy DNOW? Access our full analysis report here.

What Is The Market Telling Us

DNOW’s shares are quite volatile and have had 17 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 15 days ago when the stock dropped 8.1% on the news that the company reported third-quarter 2025 financial results that showed a significant drop in profitability, sparking investor concern. Although the company's earnings per share of $0.26 surpassed analyst forecasts, other key figures pointed to weakness. Revenue came in at $634 million, slightly short of the anticipated $635.13 million. More significantly, the company's net profit margin fell sharply to 3.4% from 9.5% in the same period of the previous year. Additionally, the company's free cash flow margin also declined, dropping to 6.2% from 11.9% in the same quarter of the previous year. These signs of contracting profitability appeared to outweigh the positive earnings surprise for investors.

DNOW is up 3.4% since the beginning of the year, but at $13.39 per share, it is still trading 23.9% below its 52-week high of $17.59 from February 2025. Investors who bought $1,000 worth of DNOW’s shares 5 years ago would now be looking at an investment worth $2,216.

Over the past six months, DNOW’s stock price fell to $12.58. Shareholders have lost 16.8% of their capital, which is disappointing considering the S&P 500 has climbed by 11.3%. This might have investors contemplating their next move.

Is now the time to buy DNOW, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free for active Edge members.

Why Is DNOW Not Exciting?

Even though the stock has become cheaper, we're cautious about DNOW. Here are three reasons we avoid DNOW and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Unfortunately, DNOW’s 4.6% annualized revenue growth over the last five years was tepid. This was below our standard for the industrials sector.

2. Projected Revenue Growth Is Slim

Forecasted revenues by Wall Street analysts signal a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect DNOW’s revenue to rise by 3.7%, close to its 4.6% annualized growth for the past five years. This projection is underwhelming and implies its newer products and services will not lead to better top-line performance yet.

3. EPS Growth Has Stalled Over the Last Two Years

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

DNOW’s flat EPS over the last two years was worse than its 2.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

DNOW isn’t a terrible business, but it doesn’t pass our quality test. Following the recent decline, the stock trades at 29.4× forward EV-to-EBITDA (or $12.58 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward one of Charlie Munger’s all-time favorite businesses.