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 Discover Financial Services climbed 1% this morning after Jefferies upgraded the credit card giant from hold to buy.
So what: Along with the upgrade, analyst Daniel Furtado raised his price target to $65 (from $57), representing about 16% worth of upside to yesterday's close. While contrarians might be turned off by Discover's price strength over the past year, Furtado thinks there's more room to run given his view of better-than-expected asset growth in 2014.
Now what: According to Jefferies, Discover's risk/reward trade-off remains rather attractive. "We are increasing our EPS estimates 14% in FY'15 from $5.26 to $6.00, 10% above consensus we believe the Street is not yet modeling in higher asset growth and net interest margins that should remain elevated," noted Furtado.
When you couple that positive outlook with Discover's industry-lagging P/E, it's tough to disagree with Jefferies' upgrade.
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The article Why Discover Financial Services Will Keep Flying originally appeared on Fool.com.Brian Pacampara has no position in any stocks mentioned, and neither does The Motley Fool. 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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