Notable Upgrades Last Friday That Could Have Lingering Effects

Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

As the year comes to an end there are more and more investors becoming pessimistic that we will not find a solution to the fiscal cliff. As a result, the markets have begun to trade more volatile and will most likely trade lower as the date approaches. However, there are several stocks that might see a trend higher in the coming weeks. These are all stocks that had an upgrade last Friday, which might provide each stock with a needed spark.

  • After being crushed by nearly 60% in 2012, shares of WebMD (NASDAQ: WBMD) rallied 6.06% in response to an upgrade to Market Perform from Raymond James. The upgrade was in response to a restructuring plan that the company had set in place early last week. Under the plan, the company looks to save $45 million in annual savings, and also plans to implement large cuts to its workforce. The stock did trade higher after the restructuring announcement, but has remained volatile. However, with an upgrade and a boost in confidence, it is very possible that the oversold stock will trend higher as more investors assess the restructuring plan.
  • Youku Tudo (NYSE: YOKU) was able to trade higher by more than 5%, before closing on Friday with gains of nearly 3%. The reason was the initiation of coverage by Morgan Stanley with an Overweight rating and a $21.10 price target. The firm argued that the company would turn profitable by the end of 2013 and that the Chinese online video ad market is growing at a 40-50% annual clip through 2014. Morgan Stanley added that the Yoku/Tudou merger gives the company 30% of Chinese online video ad sales and the ability to claim much more. The stock has lost nearly 60% of its value in the last five years despite incredible growth. Therefore, the stock is oversold, and is well positioned to rally noted catalysts occur.
  • Micron (NASDAQ: MU) added to its month-long rally of 25% with gains of nearly 3% on Friday. The push higher was due to an upgrade to Buy from Dexel Hamilton. The firm noted that its outlook was a result of improving prices for DRAM spot memory. It is believed that the pricing for the PC chips has increased nearly 15% over the last month, as demand is shifting to server and mobile DRAM. Furthermore, the anticipation of Micron becoming an iPhone supplier through its Elpida deal should create optimism for this beat down stock. Therefore, investors should continue to monitor the stock closely, as with this deal it could begin to see a Nokia-like rally.
  • Bazaarvoice (NASDAQ: BV) rallied nearly 5% on Friday after being upgraded to Outperform by Credit Suisse. The firm did not issue a public note but did mention its 13.2% float that is short, saying that the presence of short sellers and an underperforming stock might suit well for its long-term performance. This is a company that is growing fast, and operates in the social media space. However, back at the start of the year it was overvalued, but its recent pullback has allowed now for a company that is attractive compared to others in the space. With that being said, it might be worth watching over the next few weeks.

The companies above all operate in different segments, have various market capitalizations, and differ in levels of growth. However, each of these companies shares two similarities: All have traded with large losses and are considerably oversold. Therefore, something as small as an upgrade can spark optimism and lead to decent gains over a period of time. Whether or not the rally will last or will occur is unknown; it is something you must determine after your own due diligence. But due to the catalysts and the oversold prices, each stock is worth watching.  

BrianNichols has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

blog comments powered by Disqus