While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Gentium (UNKNOWN: GENTY.DL ) opened Monday up 5% after Wedbush raised its price target on the small-cap biotechnology stock.
So what: Webush maintained its "outperform" rating on Gentium, but the new price target of $35 per share (all the way from $20) represents about 40% worth of upside to its closing price on Friday. The stock soared back in July after the CHMP reversed its negative opinion on Gentium's hepatic veno-occlusive disease treatment Defitelio, but analyst David Nierengarten still sees plenty of upside in the shares as the drug gains regulatory momentum.
Now what: I'd expect the stock to remain hot in the short term.
"We anticipate that a significant (20%+) price increase ... could occur upon official approval; with changes in reimbursement by central European authorities put in place over the 2 quarters following approval," said Nierengarten. "We note that in certain countries (Germany, Italy and the UK) reimbursement decisions are made in a shorter timeframe."
Of course, with the stock now up a whopping 280% over its 52-week lows and trading at a forward P/E of 30, I'd wait for a wider margin of safety before making a longer commitment.
More compelling health care picks
Obamacare is rewriting the rules for the health care industry, and in the process of doing so, it's creating massive opportunities for investors to get ridiculously rich. How? By investing in a handful of specific health care stocks. In this free report, our analysts walk you through these opportunities and the companies that are positioned to exploit them. The informational edge contained in it is invaluable, but can only be exploited profitably while the rest of the market remains in the dark. To access this free report instantly, simply click here now.