Why Talisman Energy, Inc. Is Poised to Bounce Back

Does this analyst make a good case? Or is it just more noise from Wall Street?

Mar 20, 2014 at 1:00PM

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 Talisman Energy (NYSE:TLM) gained 1% on Thursday after TD Securities upgraded the oil and gas company from hold to buy.

So what: Along with the upgrade, analyst Menno Hulshof reiterated his price target of $14, representing about 44% worth of upside to yesterday's close. So while momentum traders might be turned off by the stock's weakness in recent months, Hulshof's call suggests growing sentiment on Wall Street that Talisman is becoming too cheap to pass up.

Now what: According to TD, Talisman's risk/reward trade-off is particularly attractive at this point. "This is the first time that we have been positive on the name since January 2013," said Hulshof. "It has become increasingly difficult to ignore the fundamental gap between TLM's share price and our estimates of underlying value (NAV and sum-of-the-parts or SOTP). In both instances, our calculations suggest that there is significant upside that is not being recognized by the market." Given the seemingly wide margin of safety built into Talisman's valuation, it's pretty tough to disagree with TD's bullishness. 

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Brian Pacampara and The Motley Fool have no position in any stocks mentioned. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

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David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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.

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