Shares of oil and gas company Jones Energy Inc (NYSE:JONE) jumped as much as 16.9% today after being upgraded by an analyst. At 12:40 p.m. EDT, shares were still up 12.3% for the day.
Analysts at Stifel upgraded Jones Energy stock from hold to a buy rating and doubled its price target to $6 per share. They think increased exposure to Oklahoma's STACK/SCOOP play will pay off, particularly after an 18,000 net acre acquisition in August for $136.5 million. The acquisition was huge compared to Jones' $245 million market cap, so it's a big bet the company is making on Oklahoma.
Analyst upgrades or downgrades can drive stocks for a day or two, but long-term they have no impact on a business's operations. In fact, analyst ratings tend to underperform the market over long periods of time.
What investors should look for is improvement in operations from the acquisition and a real return on the investment, because that's what will drive the stock long-term. An analyst rating shouldn't have any significant impact on your investment thesis.
Travis Hoium has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.