Marketmind: Trillion-Dollar Tesla

LONDON (Reuters) – A look at the day ahead from Sujata Rao

The news was less cheerful from Facebook which is contending with whistleblowers and falling popularity among the young. But a $50 billion buyback plan, unveiled after market close, may be enough to lift the shares on Tuesday, especially if fellow tech titans Google, Microsoft and Twitter also post upbeat figures.

All in all, the global equity index is inching back towards the record highs hit early-September. U.S. stock futures pointing north for Tuesday and Japanese markets added 1.8%. In Europe, a surprise 9% profit boost at UBS — its highest in six years — could see the pan-European banking index rally further past April 2019 highs.

But the supply-chain snarl-ups, container traffic jams and chip shortages bedevilling companies worldwide show no signs of going away any time soon.

Just take carmaker Hyundai, which missed profit estimates and predicted that the chip shortages hampering output would take a long time to fix. And French car parts maker Faurecia saw Q3 sales drop 10% as semiconductor shortages forced its customers to cut production.

Then there is the prospect of central bank policy tightening, with the Bank of England looking set to join rate-hike club next month.

It all adds up to slower economic growth and earnings, Citi reckons. That could see buy-side analysts switching to net “downgrade” mode on stock recommendations for the first time since the pandemic first hit, it added.

And don’t forget China, where another developer Modern Land missed paying a bond due on Monday. Shanghai and Hong Kong shares fell, despite gains for EV firms.

Key developments that should provide more direction to markets on Tuesday:

-Philadelphia Fed Nonmanufacturing Business Outlook Survey

-U.S. monthly home prices Aug/consumer confidence Oct/new home sales Sept

-U.S. 2-year note auction

-Europe earnings: Norsk Hydro posts record Q3; Reckitt Benckiser ups full-year f’cast after upbeat Q3; Logitech sales rise on work-from-home boom

– -U.S. earnings: 3M, Corning, Eli Lilly, General Electric, Hasbro, Invesco, JetBlue, Lockheed Martin, S&P Global, United Parcel Service, Xerox, Google, Microsoft, Texas Instruments, Twitter, Visa

(For graphic on Tesla – https://fingfx.thomsonreuters.com/gfx/mkt/jnvwewzegvw/Pasted%20image%201635194081739.png)

(Reporting by Sujata Rao; editing by Karin Strohecker)

The Hottest Stocks On The Market Right Now

Stocks are back at all-time highs so the party goes on!

AMD bounces off the 38,2%  Fibonacci and aims higher again.

Autodesk climbs up after a short break inside of the flag.

Activision Blizzard is still below crucial horizontal resistance.

Equinix escapes from the symmetric triangle to the upside.

3M does the same but to the downside.

Same with British American Tobacco.

T-Mobile patiently waits for the buy signal inside of the wedge pattern.

Same for Royal Dutch Shell, but in this case, we’re in the triangle/rectangle.

Rolls-Royce climbs higher after the breakout of the crucial horizontal resistance.

For a look at all of today’s economic events, check out our economic calendar.

3M Under Pressure After Downgrade

3M Company (MMM) is trading lower on Tuesday after Credit Suisse downgraded the Dow component to ‘Neutral’. The downtick ended a weeklong advance that reached within 9 points of May’s 2-year high at 208.95 while triggering a failure at the 50-day moving average, which was remounted last week. More importantly, the turnaround is taking place at the lower edge of an unfilled April 2019 gap between 199 and 220, keeping the long-term downtrend intact.

Respirators and Post-It Notes

The conglomerate makes many of the respirators and N95 masks used by hospital staff and patients during the COVID-19 pandemic. The sales spike underpinned 2020 revenue but comprised just a small portion of the $115.9 billion market cap, yielding a zero annual return for frustrated shareholders. However, their participation in the crisis made headlines, introducing a new supply of investors who knew nothing about 3M products beyond Post-It Notes and Scotch-Brite Dobie Pads.

Credit Suisse analyst John Walsh pulled no punches about ongoing litigation, noting “we do not expect to see significant multiple expansion given: 1) where we are in the cycle, 2) the difficulty in quantifying PFAS <legal exposure>, and 3) the CS/investor debate around the Combat Arms earplug lawsuits. Said another way, despite fundamental potential upside from a cyclical upturn in global IP, and potential inventory restocking, we think it will be difficult for 3M to regain its premium multiple.”

Wall Street and Technical Outlook

Wall Street consensus is stuck like glue to a ‘Hold’ rating, based upon 3 ‘Buy’, 1 ‘Overweight’, 14 ‘Hold’, 1 ‘Underweight’, and 2 ‘Sell’ recommendations. Price targets currently range from a low of $181 to a Street-high $237 while the stock is trading more than $3 below the median $200 target 25-minutes after the opening bell. This mid-range placement suggests that 3M is fairly-valued and unlikely to reward bulls or bears in coming months.

3M posted a two-year high at 259.77 in January 2018 and turned sharply lower, carving a series of lower highs and lower lows into March 2020’s 7-year low at 114.04. It bounced in a slow-motion uptick, finally reaching the January 2020 swing high at the start of 2021. The stock added more than 25 points into May and reversed into a range that’s crisscrossing the .786 Fibonacci retracement of the 2019 – 2020 selling wave and .618 retracement of the three-year downtrend. These harmonic barriers are likely to limit progress into 2022.

For a look at all of today’s economic events, check out our economic calendar.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

3M Shares Slump as it Keeps Full-Year Guidance Unchanged

3M Company shares slumped about 4% on Tuesday after the maker of N95 masks kept its full-year 2021 guidance unchanged despite beating earnings estimates for the first quarter.

The U.S. technology company said net sales grew about 10% to $8.9 billion, beating the market expectations of $8.47 billion. Both first-quarter GAAP and adjusted earnings were $2.77 per share, resulting in year-on-year increases of 23% and 27% on a GAAP and adjusted-basis, respectively. That was higher than Wall Street’s consensus estimates of $2.25 per share.

3M’s full-year 2021 guidance remains unchanged with earnings expected to be in the range of $9.20 to $9.70 per share. The company expects its full-year total sales growth in the range of 5 to 8% with organic local-currency growth between 3 to 6%.

Following this, 3M shares slumped over 3.6% to $192.43 on Tuesday.

Analyst Comments

“The trend of significant beats and modest raises or limited updates to full-year guidance has been more prominent this quarter but with consensus near the high end as management reiterates following a significant beat, the line between conservatism and caution could be a bit blurrier. Price/cost was negative in the quarter and commentary appears to imply that trend continues, which is a rarity for 3M,” noted Joshua Pokrzywinski, equity analyst at Morgan Stanley.

“Outside of Health Care, some of the biggest Y/Y drivers of improvement were in businesses with less visibility: Personal Safety, Electronics, Automotive, and Home Improvement. Strength in HC and other “general industrial” verticals should be sustainable though.”

3M Stock Price Forecast

Eight analysts who offered stock ratings for 3M in the last three months forecast the average price in 12 months of $192.88 with a high forecast of $202.00 and a low forecast of $175.00.

The average price target represents a -0.59% decrease from the last price of $194.02. Of those eight analysts, two rated “Buy”, four rated “Hold” while two rated “Sell”, according to Tipranks.

Morgan Stanley raised the base target price of $200 from $258 with a high of $232 under a bull scenario and $161 under the worst-case scenario. The firm gave an “Equal-weight” rating on the technology company’s stock.

Several other analysts have also updated their stock outlook. Zacks Investment Research upgraded shares of 3M from a “hold” rating to a “buy” rating and set a $196 price target. Citigroup lifted their price objective to $188 from $185. Barclays lifted their price objective to $180 from $163 and gave the company an “underweight” rating.

Upside and Downside Risks

Risks to Upside: A resolution of the PFAS issue would drive a positive reaction in the stock and multiple re-rating. Accelerating end-market demand driving growth well in excess of GDP – highlighted by Morgan Stanley.

Risks to Downside: A majority of 3M’s businesses are levered to general industrial short cycle momentum. A broader industrial slowdown could disproportionately impact 3M’s ability to hit its LT targets.

Check out FX Empire’s earnings calendar