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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Synaptics, Incorporated (NASDAQ: SYNA ) gained slightly Friday morning after the touchscreen technologist posted strong Q3 results and received a buy-to-strong buy upgrade from Needham & Company.
So what: Along with the upgrade, analyst Rajvindra Gill boosted his price target to $100 (from $70), representing about 55% worth of upside to yesterday's close. So while contrarian traders might be turned off by Synaptics' price surge over the past year, Gill's call could reflect a sense on Wall Street that its growth potential still isn't fully baked into the valuation.
Now what: According to Needham, Synaptics' risk/reward remains particularly attractive. "SYNA posted a significant beat and raise qrt owing to substantial momentum in fingerprint and ongoing strength in its core touch biz," said Gill. "Over the next 12-24 months, we forecast the fingerprint business could add $2.50-$3.00 of incremental EPS, combined with $3.50-$4 EPS from core touch. Over the past 2.5 years, SYNA has transformed itself: growing from $598MM in sales in FY11 to a projected $1.15BN in FY15." More importantly, with Synaptics trading at a reasonable forward P/E of 15 and boasting a rock-solid balance sheet, the downside might still be limited enough to bet on that bullishness.
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.