Is Carter's Really Worth Carrying?

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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 Carter's gained 1% today after Goldman Sachs upgraded the children's apparel company from neutral to buy.

So what: Along with the upgrade, analyst Taposh Bari boosted his price target on the stock to $89 per share (from $77), representing about 17% worth of upside to yesterday's close. While conservative investors might find the stock's year-to-date outperformance a bit worrisome, Bari believes that Carter's certainly does deserve a premium valuation based on its strong management team and industry-topping growth.

Now what: Goldman expects Carter's to post accelerated EPS increases into 2014. "Going forward, sources of upside include 1) strong revenue growth, 2) reduced SG&A and capex spend, 3) a positive international growth inflection and 4) an optimized capital structure," Goldman said in a report. With the stock hitting a new 52-week high today and trading at a P/E of around 30, however, I'd wait for a wider margin of safety before making a significant long-term commitment.

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Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Goldman Sachs. 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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