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 Under Armour, Inc. (NYSE: UA ) climbed nearly 1% in premarket trading Monday after Stern Agee upgraded the athletic apparel company from neutral to buy.
So what: Along with the upgrade, analyst Sam Poser planted a price target of $125 on the stock, representing about 20% worth of upside to Friday's close. So while momentum traders might be turned off by Under Armour's price weakness in recent weeks, Poser's call could reflect a growing sense on Wall Street that its expansion prospects are becoming too cheap to pass up.
Now what: Stern Agee now expects Under Armour to post 2014 EPS of $1.89, versus the consensus of $1.85, on a revenue jump of 23.7%. "The brand's performance has remained strong through a very tough 1Q14. Apparel sales are the most robust," said Poser. "The Speedform Apollo running shoe has come out of the gate well, and progress is being made in footwear. The International business should reach 12% penetration within the next three years." When you couple that upbeat outlook with Under Armour's recently weak stock price, it's tough to disagree with Stern Agee's bullishness.
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