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 Bank of America (BAC 1.50%) gained 1.6% today after Deutsche Bank upgraded the banking gorilla from hold to buy.
So what: Along with the upgrade, analyst Matt O'Connor boosted his price target to $18 (from $16.50), representing about 15% worth of upside to yesterday's close. So while momentum traders might be turned off by Bank of America's price weakness in recent months, O'Connor's call could reflect a sense on Wall Street that the concerns surrounding its growth trajectory are becoming overblown.
Now what: According to Deutsche, Bank of America's risk/reward trade-off is rather attractive at this point. "We think the most meaningful negative catalysts have been identified and largely priced in," said O'Connor. "From here, Bank of America is well-levered to a potential pickup in capital markets revenues, higher interest rates, and an improving US economy." When you couple that upbeat outlook with Bank of America's cheapish price-to-book of 0.8, it's tough to disagree with Deutsche's bullishness.
