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 Noble Corp. (NYSE:NE) bucked today's downtrend after Standpoint Research upgraded the offshore drilling contractor from hold to buy.
So what: Along with the upgrade, analyst Ronnie Moas planted a price target of $38 on the stock, representing about 22% worth of upside to Friday's close. While momentum traders might be turned off by the stock's weakness in recent months, Moas thinks that Noble represents a particularly timely buying opportunity given its historical trading pattern.
Now what: According to Standpoint, Noble's risk/reward trade-off is pretty attractive at this point. "The drillers have been hit hard recently and that has created some opportunities," Moas noted. "NE is a name I exited two years ago @ $41 and it has underperformed the S&P by > 5000 bps (and underperformed the XLE by 4000 bps) since then. This is a name you could have gone into at $30 and exited at $40 six times in the last ten years." More importantly, with the stock boasting a 4.5%-plus dividend yield and trading at a forward P/E of 7, Noble looks fundamentally inexpensive as well.
Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. 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.