Why Methanex Corporation Shares Could Soar to $70

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 Methanex  (NASDAQ: MEOH  ) gained 3% today after TD Securities upgraded the methanol producer from hold to buy.

So what: Along with the upgrade, analyst Cherilyn Radbourne reiterated her price target of $69, representing about 21% worth of upside to yesterday's close. So while momentum traders might be turned off by Methanex's sharp pullback in recent months, Radbourne's call could reflect a sense on Wall Street that its longer-term prospects are now too cheap to pass up.

Now what: According to TD, Methanex's risk/reward trade-off is rather attractive at this point. "Methanol prices have declined sharply from the highs reached in Q4/13 and Q1/14 as industry capacity that was offline has returned to production, but prices appear to be at/near a bottom," said Radbourne. "Notwithstanding the recent correction in methanol price, our view of the industry's medium to long-term fundamentals remains positive." With Methanex shares still off about 20% from their 52-week highs and trading at a single-digit forward P/E, it's tough to disagree with TD's upgrade.

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