While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Johnson & Johnson (NYSE:JNJ) climbed 2% today after RBC Capital upgraded the health-care gorilla from "sector perform" to "outperform."
So what: Along with the upgrade, analyst Brandon Henry boosted his price target to $104 (from $88), representing about 13% worth of upside to yesterday's close. While value investors might be turned off by Johnson & Johnson's strong share price over the past year, Henry believes there's plenty of room to run given his expectation of continued margin expansion.
Now what: RBC expects Johnson & Johnson to post 2015 EPS of $6.42, $0.14 above of the Wall Street consensus.
"While the near term investment thesis in JNJ will continue to be about pharma growth, we believe that investors may be overlooking the operating margin expansion opportunity that exists over the longer term," noted RBC. "Overall, we believe that JNJ is positioned to deliver 100-150bps of annual operating margin leverage over the next three years, as spend behind recent pharma launches abates and consumer remediation spend slows, and f/x becomes less of a drag."
When you couple that positive outlook with Johnson & Johnson's forward P/E of 15, the stock certainly seems like a reasonably priced opportunity.
More compelling income opportunities
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Johnson & Johnson. 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.