Why Walgreen Company Shares Could Spike 20%

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 Walgreen  (NYSE: WAG  ) gained about 1% in pre-market trading Wednesday after Jefferies upgraded the drugstore chain from hold to buy.

So what: Along with the upgrade, analyst Mark Wiltamuth boosted his price target to $87 (from $69), representing 20% worth of upside to yesterday's close. So while contrarian traders might be turned off by Walgreen's steady climb over the past year, Wiltamuth's call could reflect a sense on Wall Street that the company's improvement prospects still aren't fully baked into the valuation. 

Now what: Jefferies raised its 2015 earnings-per-share view for Walgreen from $4.08 to $4.36 and its 2016 outlook from $5.13 to $5.80. "We are upgrading Walgreens to a BUY rating as the bear thesis of a F2016 EBIT shortfall has now played out and management is now contemplating aggressive change including a possible tax inversion, recapitalization of the company, and more cost cutting," said Wiltamuth. Given Jefferies' solid call-making track record -- currently ranked in the top 15% of our CAPS community -- Fools might want to take a closer look at Walgreen.

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