While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Gentium (NASDAQ: GENT) opened Monday up 5% after Wedbush raised its price target on the small-cap biotechnology stock.
So what: Webush maintained its "outperform" rating on Gentium, but the new price target of $35 per share (all the way from $20) represents about 40% worth of upside to its closing price on Friday. The stock soared back in July after the CHMP reversed its negative opinion on Gentium's hepatic veno-occlusive disease treatment Defitelio, but analyst David Nierengarten still sees plenty of upside in the shares as the drug gains regulatory momentum.
Now what: I'd expect the stock to remain hot in the short term.
"We anticipate that a significant (20%+) price increase ... could occur upon official approval; with changes in reimbursement by central European authorities put in place over the 2 quarters following approval," said Nierengarten. "We note that in certain countries (Germany, Italy and the UK) reimbursement decisions are made in a shorter timeframe."
Of course, with the stock now up a whopping 280% over its 52-week lows and trading at a forward P/E of 30, I'd wait for a wider margin of safety before making a longer commitment.
