Why NASDAQ OMX Group, Inc. Will Fly Above $40

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 NASDAQ OMX Group  (NASDAQ: NDAQ  ) gained 3% today after Credit Suisse upgraded the stock exchange operator from neutral to outperform.

So what: Along with the upgrade, analyst Ashley Serrao raised her price target to $42 (from $40), representing about 18% worth of upside to yesterday's close. So while momentum traders might be turned off by NASDAQ's share-price pullback in recent weeks, Serrao's call could reflect a growing sense on Wall Street that its growth prospects are becoming too cheap to pass up.

Now what: According to Credit Suisse, NASDAQ's risk/reward trade-off is rather attractive at this point. "We view recent share price weakness from concerns around regulation as a buying opportunity for a cash flow rich franchise (9% FCF Yield)," said Serrao. "We believe the regulatory overhang on NDAQ will gradually be lifted and investor focus will return to the 10%+ EPS growth over the next two years from share buybacks, technology solutions revenue growth and operating leverage from modestly higher volumes." When you couple that upbeat outlook with NASDAQ's cheapish forward P/E of 11, it's tough to disagree with Credit Suisse's bullishness. 

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