Why Capital One Financial Corp. Shares Could Pop 15%

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 Capital One Financial  (NYSE: COF  ) gained 1% this morning after Nomura Securities upgraded the credit card giant from neutral to buy.

So what: Along with the upgrade, analyst Bill Carcache planted a price target of $94 on the stock, representing about 16% worth of upside to Friday's close. So while contrarian traders might be turned off by Capital One's price strength over the past year, Carache's call could reflect a sense on Wall Street that the company's margin expansion prospects give the stock more room to run.

Now what: Nomura raised its 2014 earnings-per-share estimate for Capital One from $6.86 to $7.08 and its 2015 view from $7.14 to $7.59. "Since the beginning of 2013, COF shares have underperformed AXP / DFS by 26% / 21%," noted Carcache. "Looking ahead, we expect COF's performance to improve, as loan growth resumes and P&L expense headwinds turn into tailwinds." When you couple that upbeat outlook with Capital One's industry-lagging P/E of 11, it's tough to disagree with Nomura's bullishness. 

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