Investors are closely following Wall Street’s recent upgrade of 3M shares to Hold. Although it may not be a groundbreaking decision, shareholders of the struggling materials giant are finding solace in this development.
Renowned Bank of America Securities analyst Andrew Obin made the upgrade of 3M (ticker: MMM) shares from Sell to Hold on Tuesday. Although his price target of $110 per share remains unchanged, Obin has identified several positive factors that could alleviate the pressure on shares.
One such factor is the recent settlement exceeding $10 billion with U.S. water providers. The settlement aims to address the remediation of PFAS, a group of chemicals present in drinking water and produced by 3M and other companies. This crucial step begins the process of eliminating the lingering PFAS impact on 3M stock. However, there are still pending PFAS-related lawsuits that need to be addressed.
Furthermore, 3M is implementing cost-cutting measures, which Obin believes could deliver “underappreciated” advantages. Additionally, the company plans to spin off its healthcare business by late 2023 or early 2024.
Investors are hopeful that these initiatives will play a significant role in stabilizing and improving the future performance of 3M shares.
A Boost for 3M Stock: Upgrade to Hold
The recent upgrade to Hold by analysts has resulted in a positive reaction for 3M stock. In premarket trading, the stock has surged more than 2% to reach $99.30. Additionally, both S&P 500 and Dow Jones Industrial Average futures have experienced a 0.2% increase.
Evaluating Recent Performance
With a decline of about 25% over the past 12 months, 3M investors have had little positive news to embrace. Furthermore, the stock remains over 60% below its all-time highs achieved in 2018. Investor sentiment has been negatively impacted by various factors, including PFAS problems, lawsuits concerning potentially faulty earplugs sold to the U.S. military, a slowing economy, and rising interest rates.
Analyst Sentiment and Price Target
The Street’s opinion on 3M stock is not particularly favorable at the moment. According to FactSet, there are no analysts currently rating 3M shares as Buy. In contrast, around 55% is the average Buy-rating ratio for stocks in the S&P 500. Following the upgrade, approximately 20% of analysts covering the company now rate its shares as Sell. Comparatively, the average Sell-rating ratio for an S&P stock is less than 10%.
The average analyst price target for 3M stock stands at $107 per share, which is close to Obin’s $110 level. Notably, during mid-2018, the average analyst price target was around $220 per share. This indicates the challenging years the company and its shareholders have endured.
