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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Facebook (FB 0.65%) rose 1% in premarket trading Thursday after Evercore Partners upgraded the social networking giant from equal weight to overweight.
So what: Along with the upgrade, analyst Ken Sena raised his price target to $75 (from $69), representing about 24% worth of upside to yesterday's close. So while momentum traders might be turned off by Facebook's price pullback in recent months, Sena's call could reflect a sense on Wall Street that its growth prospects are now too cheap to pass up.
Now what: According to Evercore, Facebook's risk/reward trade-off is rather attractive at this point. "The upgrade considers the recent pull-back (in spite of an exceptionally strong quarterly result) and new work on FB's mobile ad networking initiative (FB Audience Network), which this report explores," said Sena. "In a nutshell, FB now monetizes mobile time spent to the tune of 9:1 the industry (x-Search) which supports the notion that FB can meaningfully increase the size of the mobile advertising pie (versus just taking share)." When you couple those prospects with Facebook's cash-rich balance sheet and still-reasonable PEG of 1.1, it's tough to disagree with Evercore's upgrade.
