Why ArcelorMittal Might Keep Climbing Back

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 ArcelorMittal climbed 3% this morning after Deutsche Bank upgraded the steel giant from hold to buy.

So what: Along with the upgrade, analyst David Martin boosted his price target to $19 (from $13.50), representing about 19% worth of upside to yesterday's close. While value investors might be turned off a bit by the stock's steady rebound over the past three months, Martin believes that there's plenty of potential left given all the room that Arcelor, as well as the economy, still has to improve.

Now what: Deutsche thinks Arcelor's earnings could build plenty of positive momentum as the economy shows some signs of life. "While we remain skeptical on a removal of the global capacity overhang, management has worked aggressively on taking out costs which makes AM highly geared toward any improvement in fundamentals," noted Deutsche. "With a recapitalized B/S, significant earnings leverage and upgrades on a potentially strong H1 as catalyst, AM offers attractive risk/reward in a recovery scenario." With the stock still off a whopping 85% from its 5-year highs and trading at a price-to-cash flow of 6, I'd agree that Arcelor looks like a solid opportunity.

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The article Why ArcelorMittal Might Keep Climbing Back 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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