While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Baidu, Inc. (NASDAQ: BIDU ) gained 4% today after the Chinese Internet search giant posted strong quarterly results and received a neutral-to-buy upgrade from Deutsche Bank.
So what: Along with the upgrade, analyst Alan Hellawell III boosted his price target to $229 (from $178), representing about 43% worth of upside to yesterday's close. So while momentum traders might be turned off by Baidu's price sluggishness in recent months, Hellawell's call could reflect a growing sense on Wall Street that its prospects are becoming too cheap to pass up.
Now what: According to Deutsche, Baidu's risk/reward trade-off is particularly attractive at this point. "Baidu continues to guide upbeat top line at 56%-60% YoY for 2Q, beating cons. by ~4%," said Hellawell. "Despite a purported heavy investment plan for the rest of FY14, we believe the market has underestimated BIDU's viability and is overly conservative on its growth /earnings outlook. We believe it is unjustified for BIDU to trade at a significant discount vs. peer avg amid steadily improving fundamentals." When you couple Baidu's cheapish valuation with its still-rock solid financial position, it's tough to disagree with Deutsche's upgrade.
Upgrade your portfolio with three stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks like Netflix time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.