Skip to main content

Royal Bank of Canada(RY-T)

Today's Change
Real-Time Last Update

3M Stock Has 20% Upside, According to 1 Wall Street Analyst

Motley Fool - Fri Apr 19, 10:18AM CDT

A JPMorgan analyst recently lowered his price target on 3M(NYSE: MMM) stock to $110 from $118 and retained his neutral rating on it. That new price target still anticipates a near-20% upside over 12 months from the current price of about $92, highlighting the stock's value case.

Why the price target changed

It looks like a downgrade, but in reality, the change reflects the spin off of 3M's healthcare business, now trading as Solventum(NYSE: SOLV). 3M shareholders received one share of Solventim for every four they held in 3M. As such, Solventum's stock price of $61.75 equates to $15.44 in "old 3M." Adding the $15.44 to 3M's $91 price gives an "old 3M" price of about $106.40.

The analyst's previous price target for "old 3M" was $118, implying an 11% upside. The updated price target after the spinoff is $110, implying a 20% upside. So even though the price target fell, it could still be considered an upgraded price target.

What it means to 3M investors

The JPMorgan price target looks relatively optimistic. Citi's investment firm has a $98 target on it, and Bank of America has a $100 target. All three have neutral ratings.

One reason Wall Street is cautious about the stock is concern that 3M will cut its dividend amid ongoing cash calls from legal settlements. RBC Capital thinks a dividend cut of 50% to 70% is coming.

3M agreed to pay $6 billion between 2023 and 2029 to resolve litigation over faulty combat arms earplugs. It came to a settlement agreement to pay $12.5 billion from now through 2036 to resolve lawsuits over the contamination of U.S. drinking water supplies with PFAS, aka "forever chemicals," with $9.3 billion of that payout coming in the next five years. Meanwhile, 3M has lost the relatively stable cash flows from its healthcare business and is already in restructuring mode as management tries to turn around its disappointing operational performance.

As such, some caution over the stock is perfectly understandable.

Should you invest $1,000 in 3M right now?

Before you buy stock in 3M, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and 3M wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.

See the 10 stocks

*Stock Advisor returns as of April 15, 2024

Citigroup is an advertising partner of The Ascent, a Motley Fool company. JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and JPMorgan Chase. The Motley Fool recommends 3M and Solventum. The Motley Fool has a disclosure policy.

Paid Post: Content produced by Motley Fool. The Globe and Mail was not involved, and material was not reviewed prior to publication.

More from The Globe