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 Starbucks Corporation (NASDAQ:SBUX) gained 2% today after UBS upgraded the specialty coffee giant from neutral to buy.
So what: Along with the upgrade, analysts Keith Siegner and Dennis Geiger boosted their price target to $87 (from $80), representing about 16% worth of upside to yesterday's close. So while momentum traders might be turned off by Starbucks' year-to-date price weakness, UBS' call could reflect a sense on Wall Street that its growth prospects -- particularly overseas -- are becoming too cheap to pass up.
Now what: UBS raised its 2014 EPS estimate for Starbucks from $2.67 to $3.16 and its 2015 view from $2.65 and $3.11. "[Starbucks'] unique multifaceted consumer products company model carries near best-in-class Americas comp performance, a meaningful and expanding international presence, burgeoning CPG opportunity, and optionality around several top line sales layers, including potentially yet to be announced initiatives," said UBS. "Combined with a strong management team which should continue to provide an innovative strategic direction and solid execution, and it's easy to envision high teens EPS growth over the long-term." When you couple that upbeat outlook with Starbucks' still-reasonable forward P/E in the mid-20s, it's tough to disagree with UBS' upgrade.