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 Microsemi (NASDAQ:MSCC) increased 2% today after Goldman Sachs upgraded the semiconductor solutions specialist from neutral to buy.
So what: Along with the upgrade, analyst James Covello planted a price target of $30 (from $26) on the stock, representing about 23% worth of upside to Friday's close. So while momentum traders might be turned off by Microsemi's year-to-date price sluggishness, Covello's call could reflect a sense on Wall Street that the company's turnaround prospects are becoming too cheap to pass up.
Now what: According to Goldman, Microsemi's risk/reward trade-off is rather attractive at this point. "While defense exposure has been a concern of ours, we believe Microsemi significantly undershipped end demand in 4QCY13 (its A&D sales were down 17% yoy), positioning it to benefit from improving orders (1QCY BTB above 1)," said Covello. When you couple that upbeat outlook with Microsemi's single-digit forward P/E, it's tough to disagree with Goldman's bullishness.
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.