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 Kinder Morgan, Inc. (NYSE:KMI) gained slightly this morning after Goldman Sachs upgraded the midstream energy company neutral to conviction buy.
So what: Along with the upgrade, analyst Theodore Durbin planted a price target of $44 on the stock, representing about 26% worth of upside to yesterday's close. So while momentum traders might be turned off by Kinder's price decline over the past year, Goldman's call could reflect a sense on Wall Street that its growth prospects are now too cheap to pass up.
Now what: According to Goldman, Kinder's risk/reward trade-off is rather attractive at this point. "We are particularly bullish on the opportunity to provide midstream solutions out of Appalachia (Marcellus/Utica), where we believe Kinder is well positioned, as well as in gas-fired power generation, LNG, and Mexico exports," said Durbin. "KMI valuation screens attractive on 'yield plus growth' and on our SOTP, both on an absolute basis and relative to midstream C-corps." When you couple Kinder's attractive midstream position with its juicy 5%-plus dividend yield, it's tough to disagree with Goldman's upgrade.
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Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends and owns shares of Kinder Morgan. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.