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 Tesla Motors (NASDAQ:TSLA) climbed 4% today after Wedbush upgraded the electric-vehicle manufacturer from neutral to outperform.
So what: Along with the upgrade, analyst Craig Irwin boosted his price target on the stock to $240 (from $180), representing about 33% worth of upside to yesterday's close. While value investors might be turned off by the stock's massive run in 2013, Irwin's research indicates good receptiveness of mainstream car buyers to purchase electric vehicles, suggesting plenty of room for further price appreciation.
Now what: Based on its proprietary survey data, Wedbush boosted its Gen III expectations. "In a survey of 892 respondents, we were pleasantly surprised that over 20% of respondents indicated they would 'absolutely consider' driving an EV (vs. 65% "maybes"), and 19% were willing to pay a $5,000 or greater premium for a 90% improvement in fuel economy," noted Wedbush. "This indicates a healthy number of mainstream car buyers are likely willing and able to pay the initial premium to buy an EV, where they would expect a payback based on improved fuel economy." However, with Tesla up a staggering 600% over its 52-week lows and trading at a price-to-sales ratio of 16, I'd wait for a much wider margin of safety in case things don't play out as positively as Wedbush expects.
Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Tesla Motors. The Motley Fool owns shares of Tesla Motors. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.