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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of H&R Block (HRB) climbed 3% today after Morgan Stanley upgraded the tax preparation company from equal weight to overweight.
So what: Along with the upgrade, analyst Thomas Allen boosted his price target on the stock to $33 per share (from $25), representing about 24% worth of upside to yesterday's close. The stock has slipped in recent weeks on worries that Obamacare -- and the new growth opportunities it provides H&R -- would be delayed, but H&R's recent deal with GoHealth insurance gives Allen some comfort that the upside potential is real.
Now what: Morgan now expects H&R to earn about $2.20 per share in 2015. "While HRB has traded off over the past few months on concerns [the Affordable Care Act] will be delayed or de-funded, we have warmed up to the stock, especially after HRB partnered w/ GoHealth," said Morgan in a note to clients. "We've adjusted our [estimates] to reflect our latest thinking on ACA/buyback." Of course, with the stock now up about 70% from its 52-week lows and trading at a 15-plus P/E, I'd wait for H&R's new partnership to actually bear fruit before betting on it.
