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 Pandora Media, Inc. (P) climbed about 1% in premarket trading Monday after Wedbush upgraded the Internet radio services company from neutral to outperform.
So what: Along with the upgrade, analyst Michael Pachter planted a price target of $35 on the stock, representing about 23% worth of upside to Friday's close. So while momentum traders might be turned off by Pandora's sharp pullback over the past month, Pachter's call could reflect a growing sense on Wall Street that its growth prospects are now too cheap to pass up.
Now what: According to Wedbush, Pandora's short-term risk/reward trade-off is pretty attractive at this point. "Pandora will report Q1 results after the market close on Thursday, April 24, and we expect management to raise full-year guidance by the amounts of the Q1 beats at least," said Pachter. "Current FY:14 guidance is for revenue of $870 – 890 million and EPS of $0.13 – 0.17, below our estimates of $902 million and $0.20, and consensus of $893 million and $0.17." More importantly, with Pandora boasting a rock-solid balance sheet and recently weak stock price, the downside might be limited enough to bet on that upbeat outlook.
