While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Brunswick (NYSE:BC) gained 1.5% today after KeyBanc upgraded the recreational products company from hold to buy.
So what: Along with the upgrade, analyst Scott Hamann planted a price target of $55 on the stock, representing about 35% worth of upside to yesterday's close. So while momentum traders might be turned off by Brunswick's year-to-date sluggishness, Hamann's call could reflect a sense on Wall Street that its growth prospects are just too cheap to pass up.
Now what: According to KeyBanc, Brunswick's risk to reward trade-off is pretty attractive at this point. "As the Company undergoes a major refresh across its core SeaRay line, we have taken a deeper dive into the upside potential this product cycle creates, and we now believe the brand has the potential to double by 2017 to roughly $600 million, having peaked at over $1 billion in 2005, contributing to earnings power of over $4.30 per share," said Hamann. "Our analysis incorporates modest, sustained momentum in the overall boat market along with a rebound in worldwide SeaRay units to roughly 4,100 by 2017 (from 3,100 in 2013, 8% CAGR), with meaningful ASP (+6-7.5% annually) and unit growth coming from the lower-volume 31-40 foot Cruiser (350 SLX) and 41-62 foot Yacht segments (510 Fly), where the bulk of the recent innovations are focused." When you couple that upbeat outlook with Brunswick's cheapish forward P/E of 13, it's tough to disagree with KeyBanc's bullishness.
Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. 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.
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