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 Rambus popped 5% today after Citigroup upgraded the technology company from neutral to buy.
So what: Along with the upgrade, analyst Terence Whalen reiterated his price target of $12, representing about 40% worth of upside to yesterday's close. While momentum traders might be turned off by the stock's weak action over the past several months, Whalen believes that Rambus' biggest hurdles are in the rearview mirror, leaving plenty of room for investors to profit.
Now what: According to Citi, Rambus' risk/reward trade-off is pretty attractive at this point.
"With the main negative risk (Samsung renewal) realized 1/5/14, 3 factors should drive positive '14 revisions: a) new SoC licensing deals (SoC licensees include STM, Mediatek, NVDA, BRCM, FSL but exclude XLNX, ALTR, TXN, QCOM, INTC), b) 'new business' growth primarily in Cryptography Research sales, and c) potential addition of the last remaining DRAM licensee Nanya," Whalen noted.
So while Rambus might still be too speculative for average investors, those seemingly juicy catalysts, coupled with the stock's still-sluggish price action, make Citi's recommendation an interesting one for tech-savvy Fools.
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The article Why Rambus Rallied Today originally appeared on Fool.com.Fool contributor 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.
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