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 The Rubicon Project, Inc. (NYSE: RUBI ) soared 15% today after the advertising automation technologist posted strong Q1 results and received a sector perform to outperform upgrade from RBC Capital.
So what: Along with the upgrade, analyst Rohit Kulkarni planted a price target of $19 on the stock, representing about 65% worth of upside to yesterday's close. So while momentum traders might be turned off by Rubicon's sharp pullback in recent weeks, Kulkarni's call could reflect a sense on Wall Street that its growth prospects are becoming too cheap to pass up.
Now what: According to RBC, Rubicon's risk/reward trade-off is rather attractive at this point. "RUBI posted a strong 'no-surprises' Q1 result, its first earnings out of the gate," noted Kulkarni. "With a 45% correction in RUBI shares since April, and fundamental trends coming in better than expected, we are upgrading the shares of RUBI to Outperform with a $19 PT, as we continue to consider RUBI a best-in-class ad-tech asset." When you couple Rubicon's still-speculative growth trajectory with today's big run-up, however, I'd hold out for a much wider margin of safety before buying into that optimism.
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