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 Amazon.com climbed 3.5% today after UBS upgraded the online retail gorilla to buy from neutral.
So what: Along with the upgrade, analyst Eric Sheridan boosted his price target to $385 (from $305), representing about 24% worth of upside to yesterday's close. While value investors might be turned off by the stock's steady climb in 2013, Sheridan believes that there's plenty of room to run given the strong secular and operational trends working in Amazon's favor.
Now what: UBS sees 2014 sales at $91.2 billion with gross margins of 27.1% and for 2015, sales of $109.5 billion with gross margins of 28.5%. "Specific drivers for our upgrade: a) our expectations for a reacceleration of revenue growth and paid unit growth in Q4 and beyond ... ; b) the globalization of its Kindle ecosystem; & c) its under-appreciated Advertising business," noted UBS. Of course, with Amazon shares soaring to a new 52-week high today and trading at a price-to-cash-flow ratio of 30, I'd wait for a wider margin of safety in case things don't grow as quickly as UBS thinks.
Start your everlasting portfolio today
As every savvy investor knows, Warren Buffett didn't make billions by betting on half-baked stocks. He isolated his best few ideas, bet big, and rode them to riches, hardly ever selling. You deserve the same. That's why our CEO, legendary investor Tom Gardner, has permitted us to reveal The Motley Fool's 3 Stocks to Own Forever. These picks are free today! Just click here now to uncover the three companies we love.
The article Why Amazon Shares Might Keep Soaring originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. 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.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.