1 Wall Street analyst thinks 3M stock will hit $120. Is it a purchase?
Wall Street is warming to investment proposals from industry giants as new CEOs look to improve the company’s growth rate.
bank of america Recently upgraded securities 3M (hmm -0.11%), analyst Andrew Obin changed the stock from Neutral to Buy and raised his price target from $105 to $120. This represents a premium of more than 19% to the current share price over the next 12 months.
3M has initiated some de-risking actions.
The key to the stock’s investment case is recognizing that 3M has reduced uncertainty about several key issues hanging over the stock in recent years. For example, 3M signed a $10.3 billion settlement agreement with public water utilities over its production of PFAS chemicals. It also reached a $6 billion settlement with combat weapons earplug claimants. Investors thus have a clearer picture of the multi-year and multi-billion dollar payments 3M will have to make over the next decade.
In addition, 3M spun off its healthcare business. solvent — A move that would cost 3M about $7.7 billion in cash. The company also holds a 19.9% stake in Solventum (currently worth $1.94 billion), which it could sell to raise additional cash. 3M also cut its dividend, freeing up future cash resources to help grow the business.
3M is taking a new approach.
Increasing growth rates is an important consideration, and 3M’s new CEO, William Brown, has an opportunity to take a fresh look at 3M and reshape the company for growth.
Brown’s tenure begins on a relatively positive note, as several of 3M’s key end markets, including semiconductors and electronics, are in recovery mode for 2024. Additionally, cost-cutting programs launched last year appear to be improving margins.
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attractive valuation
There’s no guarantee that 3M will turn around years of poor operating performance, and Brown has yet to lay out his strategic vision, but the potential is there. This also helps 3M trade at an attractive valuation. All of this adds up to make BofA’s new target price a reasonable price for investors to target, and for value investors, the stock is worth buying.
Bank of America is an advertising partner of The Ascent, a Motley Fool company. Isamaha does not have any positions in these stocks. The Motley Fool has a position at and recommends Bank of America. The Motley Fool recommends 3M and Solventum. The Motley Fool has a disclosure policy.
