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 ENSCO (NYSE: ESV ) slipped slightly today after Jefferies downgraded the offshore contract driller from buy to hold.
So what: Along with the downgrade, analyst Brad Handler planted a price target of $56 on the stock, representing about 12% worth of upside to Friday's close. So while contrarian traders might be attracted to ENSCO's sharp price decline over the past year, Handler's call could reflect a sense on Wall Street that its troubles still aren't fully baked into the valuation.
Now what: According to Jefferies, ENSCO's risk/reward trade-off is pretty balanced at this point. "With (still) >1/3 of its revenues after newbuild deliveries derived from jackups, including markets that could see pressure 'first', such as Mexico, the GoM and SE Asia, we lower EPS and in turn our Price Target (to $56) for ESV, no longer supporting our Buy-rating," said Handler. With ENSCO shares flirting with their 52-week lows and currently boasting a 6% dividend yield, however, those short-term concerns might be providing patient Fools with a juicy long-term income opportunity.
3 stock picks to ride America's energy bonanza
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a look at three energy companies using a small IRS "loophole" to help line investor pockets. Learn this strategy, and the energy companies taking advantage, in our special report "The IRS Is Daring You To Make This Energy Investment." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.