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Why Joy Global Inc. Shares Could Jump 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 closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Joy Global (NYSE: JOY  ) gained 1% in pre-market trading Friday after Bank of America upgraded the mining equipment manufacturer from neutral to buy.

So what: Along with the upgrade, analyst Ross Gilardi planted a price target of $70 on the stock, representing about 13% worth of upside to yesterday's close. So while contrarian traders might be turned off by Joy Global's earnings-related pop yesterday, Gilardi's call could reflect a sense on Wall Street that the company's growth prospects still aren't fully baked into the valuation.

Now what: According to BofA, Joy Global's risk-to-reward trade-off is rather attractive at this point. "We upgrade Joy Global to Buy on the back of a 7% FQ2 EPS beat and FY14 guidance reiteration despite a brutal coal operating environment," said Gilardi. "Joy's aftermarket business (70% of sales) is putting a floor under earnings, and aftermarket orders were up 10% for the second quarter in a row." When you couple Joy Global's still-hefty debt load with its highly volatile and suddenly hot shares, however, I'd hold out for a wider margin of safety before betting on that trend to continue. 

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Brian Pacampara

I take a look at big 10% moves, as well as stock-shaking analyst calls, on a daily basis for The Fool. While I don't believe in active trading, closely monitoring Mr. Market's mood swings can help identify long-term opportunities.

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Related Tickers

9/3/2015 1:20 PM
JOY $18.57 Down -3.56 -16.09%
Joy Global, Inc. CAPS Rating: ****