Why CenturyLink Inc. Is Poised to Bounce 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 closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of CenturyLink  climbed 2% this morning after Macquarie upgraded the integrated telecommunications company from neutral to outperform.

So what: Along with the upgrade, analyst Kevin Smithen boosted his price target to $33 (from $31), representing about 14% worth of upside to yesterday's close. While momentum traders might be turned off by the stock's steady decline over the past year, Smithen believes CenturyLink is a rather timely opportunity given the mounting pressure on management to unlock value.

Now what: According to Macquarie, CenturyLink's risk/reward trade-off is pretty attractive at this point. "We point out that [Frontier Communications] has shown an interest in acquiring more rural access lines and believe divestitures could be one scenario for CTL," noted Smithen. "In our view, all of the options we looked at have the potential to return 20+% to shareholders over the next year." With the stock boasting a juicy 7.5% dividend yield, contrarians who commit will even get paid to wait for the thesis to play out.

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The article Why CenturyLink Inc. Is Poised to Bounce Back 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.

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