The analyst in question does not expect any significant multiple expansion for 3M shares
Blue chip conglomerate for consumer goods 3M Co (NYSE: MMM) is attracting mixed analyst attention this morning. The stock is down 1.6%, last trading at $ 196.63 after Credit Suisse downgraded it from outperform to neutral. The analyst in the coverage, despite the fundamental upside potential, does not expect any significant multiple expansion for the company, as sentiment towards 3M is becoming more balanced in relation to the market. However, the brokerage firm also raised MMM’s price target from $ 200 to $ 212.
Analysts have been overwhelmingly pessimistic about the security that comes into play today. Of the 10 questioned 10, eight had a tepid “hold” or lower rating, while the remaining two MMM rated “strong buy”.
This bearish sentiment is also reflected in the option pits, where the focus has been on puts recently. This corresponds to MMM’s 50-day put / call volume ratio on the International Securities Exchange (ISE), the Cboe Options Exchange (CBOE) and the NASDAQ OMX PHLX (PHLX), which is in the 99th percentile of their annual bandwidth. In other words, long puts are picked up faster than usual.
That pessimism still sounds true today. So far, 883 puts have already exceeded the band, double the average intraday amount. The two most popular options are the weekly 8/6 187.50 and 190 strike puts, both of which are currently opening new positions.
These options traders are in luck as the stock currently has affordable premiums. The Schaeffer’s Volatility Index (SVI) of 15% of the stock is in the 1st percentile of the readings for the past 12 months, which suggests that option players are pricing in low volatility expectations for MMM.
On the charts, 3M shares cooled off in June from a two-year high of $ 208.95 on May 10th. The stock’s 100-day moving average halted the retreat, though beating the $ 200 round mark will be a focus for the future. In the longer term, the 3M share has a healthy lead of 24.6% over the previous year.