What happened

Shares of Rockley Photonics (RKLY), a specialty maker of semiconductors for the healthcare industry, jumped 5.5% as of 2 p.m. EDT Thursday.

You can thank Cowen for that.

Arrow angles up on a green stock chart.

Image source: Getty Images.

So what

In a note out this morning, investment banker Cowen initiated coverage of Rockley stock with an outperform rating and a $22 price target that implies the stock will more than double over the next year.  

"RKLY's silicon photonics sensing platform addresses a well over $48B" total addressable market, explained Cowen in its note, covered today on StreetInsider.com. "We expect strong initial adoption by leading consumer wearable device companies focused on expanding and enhancing health and wellness applications followed by eventual penetration of the medical device market."

Now what

Until that penetration happens, however, Rockley Photonics remains an iffy investment. Valued in excess of $1.1 billion, and with $162 million in net debt besides, Rockley did less than $12 million in sales over the past year -- and is far from a profitable operation. (In fact, the company lost $149 million and burned through $94 million in negative free cash flow.)

It's difficult to value a stock like this one. On the one hand, Cowen could be right about the company's potential, and Rockley could grow quickly, leading to rapid gains in stock price. On the other hand, it hasn't done this yet -- and indeed to the contrary, sales at Rockley so far this year are down nearly more than 70% from last year's first half.

The analyst's optimism notwithstanding, I'd classify Rockley stock as an extremely speculative idea.