Shares of Chinese hotel operator Huazhu Group Limited (NASDAQ:HTHT) are up 13.3% as of midday Wednesday following an upgrade of the stock from bank and broker Morgan Stanley.
It's a relatively obscure name, but not so obscure that Morgan Stanley analyst Praveen Choudhary opted not to chime in. Following nearly two months' worth of heavy selling that shaved off one-third of the stock's value through Tuesday's close, Choudhary countered by rerating Huazhu Group to overweight. The analyst also upped his price target from $50 to $51 per share, up more than 10% from the stock's present, post-surge price.
Wednesday's big gain is arguably more of a bounce back from the recent pullback than the Morgan Stanley upgrade. Huazhu Group was one of countless names swept up in a broad sell-off of Chinese stocks, and technology stocks in particular. Already ripe for a recovery, Choudhary's bullish move sparked an exaggerated outcome.
Most stocks struggle to follow through on such news-based gains. This one may be an exception to that norm, however.
Even with Wednesday's rally, this stock remains on the order of 20% below its pre-sell-off price -- a sell-off that materialized for no clear, direct reason other than guilt by association. It's not a buy specifically because it's oversold. To the extent it was a name worth owning before the pullback, however, it's certainly a more compelling prospect now that at least one analyst has indirectly suggested the steep sell-off isn't merited.