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 upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Deckers Outdoor (DECK 3.21%) popped 4% today after Wedbush upgraded the shoemaker from neutral, to outperform.
So what: Along with the upgrade, analyst Corinna Freedman boosted her price target to $74 per share (from $54), representing about 16% worth of upside to its Thursday close. Wedbush said that management's tone at a recent meeting was particularly positive, giving the analyst some comfort over its near-term sales estimates, long-term profit assumptions, and outlook for the UGG brand.
Now what: While Wedbush acknowledged that the call is a bit speculative, the stock's general risk/reward trade-off is certainly more attractive. "Over the longer term, we are incrementally more comfortable with our previous assumption of $5.00 in earnings power and our model now assumes that DECK could realistically achieve this by fiscal 2016," wrote Freeman in a note to investors. When you couple Deckers' red-hot stock price -- now up 130% from its 52-week lows -- with the competitive and inventory risks that remain, however, I'd hold out for a wider margin of safety before buying into that bullishness.
