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 Altera (UNKNOWN:ALTR.DL) rallied 2% today after RBC Capital upgraded the semiconductor company from sector perform to outperform.
So what: Along with the upgrade, analyst Doug Freedman raised his price target to $39 (from $36), representing about 19% worth of upside to Friday's close. So while momentum traders might be turned off by Altera's pullback in recent months, Freedman's call could reflect a sense on Wall Street that its growth prospects are becoming too cheap to pass up.
Now what: According to RBC, Altera's risk/reward trade-off is rather attractive at this point. Freeman remarked:
We continue to see stronger deployment globally which should support Y/Y growth expectations in the Wireless segment, as builds at China Unicom and China Telecom should augment growth in the China market in 4Q14... Moreover, the transition to 14nm in 2015 should drive share gains and operating margins higher given architectural advantages driven by a strong design team. ALTR fits the mold of a semiconductor company that has become increasingly focused on increasing shareholder returns.
When you couple that upbeat outlook with Altera's strong balance sheet and beaten down stock price -- still off about 15% from its 52-week highs -- it's tough to disagree with RBC's upgrade.
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.