Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Noah Holdings (NYSE:NOAH), an investment management firm in China that caters to upper-income individuals, soared as much as 27% after receiving an analyst upgrade.
So what: Before the opening bell, Oppenheimer analyst Ella Ji upgraded Noah to "outperform" from "perform" and set a price target on shares of $18, implying 38.5% upside from yesterday's closing price. Ji's upgrade was based on the fact that Noah has, so far this year, boosted its net income forecast by roughly 50% to a range of $50 million to $55 million and is on pace to deliver year-over-year earnings growth of 86%-105%. Ji cites the company's Gopher asset management business as its main driver of growth but also notes that its recurring revenue has been a source of steady growth.
Now what: This seems like an awfully big move for a single analyst upgrade, so now is as good a time as any to remind investors that analyst actions are often short-term price dictators of stock movements, and rarely do they affect the long-term investing thesis in a company. Noah has made incredible strides in improving its recurring revenue, which I felt back in February is the bread and butter of its business -- and that's really what matters. Even following today's run higher, I don't consider the company particularly expensive, but I'd probably wait for calmer heads to prevail before considering a position.
Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.
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