Four Analyst Upgrades Worth Noting
Brian is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Sometimes an analyst issues a revised outlook or changes his/her rating, but does not inform investors of the reasons behind the call. These typically move stocks on the call alone; the price target and outlook. However, some analysts provide detailed reasons behind the call; these are the outlooks that should be noted and used as part of your fundamental research. Therefore, I am taking a look at such outlooks and determining the best way to utilize the information.
- Shares of McEwen Mining rose more than 2% on Friday after an analyst initiated coverage with bullish notes. The firm says that McEwen is entering a period of accelerated production growth following a 10% increase in throughput capacity at its San Jose mine. The company is also increasing gold production in El Gallo Phase 1, and El Gallo Phase 2. My opinion is that the company does appear stable in an unpredictable industry. Furthermore, it may be a good investment, as it trades just 22% as volatile as the market and would provide exposure to the mining space.
- Morgan Stanley made a gutsy call by upgrading Alcatel-Lucent two notches after a quarter that many believed was filled with warning signs. However, the firm is upgrading ALU due to a solid restructuring plan and a successful refinancing deal. The firm did acknowledge that it’s worried about margins from its unprofitable segments, but the good news is that Alcatel should remove these unprofitable segments with the sale of assets. Compared to fundamentals, Alcatel is the cheapest in the telecom equipment space, and with its restructuring plan in full swing, the stock could go much higher as fundamentals improve.
- UBS has been one of Westlake’s toughest critics, previously having a $66 price target on the stock. However, the firm upgraded the stock with a $90 price target citing its view that U.S. ethane will remain oversupplied through 2016 and will therefore trade at a discount based on natural gas prices. In the past, margins were the main concern for this company, but now RBC believes that stability is possible. I view the stock as a high risk investment, and believe that RBC’s price target is accurate, therefore I see little upside.
- After four years of flat trading, shares of Activision Blizzard rallied more than 11% following a breakout quarter, and Sterne Agee followed suit with a bullish outlook. The firm said that the company is well-positioned for new consoles from developers and predicts that buybacks could occur due to the company’s large cash position and short term investments. Investors should also note that despite its rally the stock is still greatly undervalued. Now that it has broken out to trade higher, look for continued gains over the next couple weeks.
In a previous article I wrote about analysts “following the leader” and how one upgrade usually starts a chain effect that can then push a stock even higher. It is good to use this information as part of your research but you must ensure that you are assessing the stock and its valuation with your own due diligence. It is important not to make an emotional decision based on the performance of a stock, and if you refrain from making such a decision then large gains could follow.
BrianNichols is long ALU. The Motley Fool recommends Activision Blizzard. The Motley Fool owns shares of Activision Blizzard. 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!