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 Kinder Morgan, Inc. (KMI 0.88%) gained slightly this morning after Goldman Sachs upgraded the midstream energy company neutral to conviction buy.
So what: Along with the upgrade, analyst Theodore Durbin planted a price target of $44 on the stock, representing about 26% worth of upside to yesterday's close. So while momentum traders might be turned off by Kinder's price decline over the past year, Goldman's call could reflect a sense on Wall Street that its growth prospects are now too cheap to pass up.
Now what: According to Goldman, Kinder's risk/reward trade-off is rather attractive at this point. "We are particularly bullish on the opportunity to provide midstream solutions out of Appalachia (Marcellus/Utica), where we believe Kinder is well positioned, as well as in gas-fired power generation, LNG, and Mexico exports," said Durbin. "KMI valuation screens attractive on 'yield plus growth' and on our SOTP, both on an absolute basis and relative to midstream C-corps." When you couple Kinder's attractive midstream position with its juicy 5%-plus dividend yield, it's tough to disagree with Goldman's upgrade.
