Will Big Lots Inc. Shares Hit $45?

Will Big Lots Inc. Shares Hit $45?

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 Big Lots gained about 1% on Monday after FBR Capital upgraded the closeout retailer from market perform to perform.

So what: Along with the upgrade, analyst Dutch Fox boosted his price target to $45 (from $35), representing about 25% worth of upside to Friday's close. So while contrarians might be turned off by the stock's recent strength, Fox's call suggests that Mr. Market's enthusiasm is quite justified and that there's even more room run.

Now what: According to FBR, Big Lots' risk/reward trade-off remains pretty attractive at this point. "[W]e believe that (1) the turnaround is clearly under way, (2) management was remarkably adept at managing the business during a terrible holiday season, (3) the company's outlook is very achievable, (4) the core U.S. stores' earnings power is under-appreciated by the Street, and (5) FCF and valuation should protect the downside," said Fox. "The next catalysts for the stock are 1Q14 earnings in May and the newly announced June analyst day." Given Big Lots' still-questionable competitive moat and financial strength, however, I'd wait for a much wider margin of safety before betting on them.

More powerful ways to grow
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

The article Will Big Lots Inc. Shares Hit $45? originally appeared on Fool.com.

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.

Copyright © 1995 - 2014 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Originally published