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 Under Armour Inc (NYSE:UAA) gained 2% this morning after Jefferies upgraded the athletic apparel specialist from hold to buy.
So what: Along with the upgrade, analyst Randal Konik boosted his price target to $65 (from $50), representing about 27% worth of upside to yesterday's close. So while contrarian traders might be turned off by Under Armour's price pullback in recent months, Konik's call could reflect a sense on Wall Street that its long-term growth prospects are becoming too cheap to pass up.
Now what: Jefferies believes that Under Armour's top line can exceed $15 billion over the next 10 years. "We conducted a survey of 2,000+ parents across the country to ascertain their children's activewear preferences," Konik said. "Our work confirms a strong and growing bias among youths for the UA brand, which ranked second only to Nike in terms of 'coolness' and preference. ... As a relatively small company (~$3 billion in annual revenue vs ~$28 billion for NKE) in an up-trending category, we see exceptional opportunities for UA to expand." When you couple that upbeat outlook with the stock's recent sluggishness -- still off about 20% from its 52-week highs -- it's tough to disagree with Jefferies' call.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Under Armour. The Motley Fool owns shares of Under Armour. 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.