Why H&R Block Might Be a Healthy Pick

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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 closer look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of H&R Block climbed 3% today after Morgan Stanley upgraded the tax preparation company from equal weight to overweight.

So what: Along with the upgrade, analyst Thomas Allen boosted his price target on the stock to $33 per share (from $25), representing about 24% worth of upside to yesterday's close. The stock has slipped in recent weeks on worries that Obamacare -- and the new growth opportunities it provides H&R -- would be delayed, but H&R's recent deal with GoHealth insurance gives Allen some comfort that the upside potential is real.

Now what: Morgan now expects H&R to earn about $2.20 per share in 2015. "While HRB has traded off over the past few months on concerns [the Affordable Care Act] will be delayed or de-funded, we have warmed up to the stock, especially after HRB partnered w/ GoHealth," said Morgan in a note to clients. "We've adjusted our [estimates] to reflect our latest thinking on ACA/buyback." Of course, with the stock now up about 70% from its 52-week lows and trading at a 15-plus P/E, I'd wait for H&R's new partnership to actually bear fruit before betting on it. 

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The article Why H&R Block Might Be a Healthy Pick 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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