Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
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 Big Lots (NYSE: BIG ) climbed 2% in premarket trading Monday after KeyBanc upgraded the closeout retailer from hold to buy.
So what: Along with the upgrade, analyst Bradley Thomas planted a price target of $45 on the stock, representing about 21% worth of upside to Friday's close. So while contrarians might be turned off by Big Lots' sharp share spike over the past month, Thomas' call could reflect a strengthening sense on Wall Street that its turnaround potential still isn't fully baked into the price.
Now what: According to KeyBanc, Big Lots' risk/reward trade-off remains rather attractive at this point. "[CEO David Campisi] is implementing an 'Edit to Amplify' strategy to improve stores' shoppability for 'Jennifer,' its core customer," said Thomas. "While this strategy is overarching and likely to be the most important earnings lever for BIG in the coming years, our analysis suggests investors receive this effort as a 'call option,' as several other initiatives have the potential to significantly improve earnings on their own. First, BIG is exiting Canada, eliminating its drag on earnings and focusing management's time on the core business. Additionally, BIG plans for continued share repurchases, supported by its strong FCF outlook." When you couple the intense competitive headwinds still facing Big Lots -- from both brick-and-mortar behemoths and online disruptors -- with its red-hot stock price, however, I'd wait for a much wider margin of safety before jumping in.
Six stock picks poised for incredible growth
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.