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 Hawaiian Holdings (NASDAQ:HA) climbed 4% today after Bank of America upgraded the regional airline from underperform to neutral.
So what: Along with the upgrade, analyst Glenn Engel boosted his price target to $16 (from $10.50), representing about 9% worth of upside to yesterday's close. So while contrarian traders might be turned off by Hawaiian's price surge over the past year, Engel's call could reflect a growing sense on Wall Street that the company's prospects still aren't fully baked into the valuation.
Now what: B of A raised its 2014 earnings-per-share outlook for Hawaiian from $0.90 to $1.20 and its 2015 view from $1.05 to $1.35. "We had viewed HA as a value trap -- a stock that looks inexpensive because investors underestimate the impact on int'l margins from currency and competition," said Engel. "While consensus estimates did fall 50% in 1H13, estimate revisions turned positive in 2H13 and int'l margin pressures ease as 2014 progresses." Of course, when you couple the airline industry's notoriously intense nature with the stock's red-hot run-up -- up almost 200% over its 52-week low -- Hawaiian's long-term risk/reward proposition doesn't seem all that attractive.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. 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.