Why Meritor Inc Shares Could Vroom to $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 closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Meritor Inc (NYSE: MTOR  ) rallied 2% Thursday after Piper Jaffray initiated coverage on the commercial vehicle equipment company with an overweight rating.

So what: Along with the bullish call, analyst Alexander Potter planted a price target of $15 on the stock, representing about 18% worth of upside to Wednesday's close. So while momentum traders might be turned off by Meritor's price weakness in recent weeks, Potter's call could reflect a sense on Wall Street that its near-term growth prospects are becoming too cheap to pass up.

Now what: According to Piper, Meritor's short-term risk/reward trade-off is rather attractive at this point. "We think there's some risk to the longer-term story -- mostly regarding MTOR's ability to materially out-grow the underlying truck market -- but over the next 1+ year MTOR's biggest markets (North America and Europe, which represent >75% of sales) are likely to grow nicely due to cyclicality," said Potter. "We think MTOR's 'M2016' plan will allow the company to lever this growth and deliver strong EBITDA conversion. As a result, we think upward guidance revisions are more likely than 'misses.'" When you couple Meritor's still-hefty debt load with the risks surrounding its long-term competitive position, however, conservative Fools would probably do well to maintain their distance.

You can't afford to miss this
"Made in China" -- an all too familiar phrase. But not for much longer: There's a radical new technology out there, one that's already being employed by the U.S. Air Force, BMW and even Nike. Respected publications like The Economist have compared this disruptive invention to the steam engine and the printing press; Business Insider calls it "the next trillion dollar industry." Watch The Motley Fool's shocking video presentation to learn about the next great wave of technological innovation, one that will bring an end to "Made In China" for good. Click here!

Read/Post Comments (0) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 3033140, ~/Articles/ArticleHandler.aspx, 8/29/2015 5:51:20 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

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.

Today's Market

updated 8 hours ago Sponsored by:
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 1.21 0.06%
NASD 4,828.33 15.62 0.32%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

8/28/2015 4:03 PM
MTOR $12.91 Down -0.01 -0.08%
Meritor Inc CAPS Rating: **