Why Walgreen Company Shares Could Spike 20%

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 Walgreen  gained about 1% in pre-market trading Wednesday after Jefferies upgraded the drugstore chain from hold to buy.

So what: Along with the upgrade, analyst Mark Wiltamuth boosted his price target to $87 (from $69), representing 20% worth of upside to yesterday's close. So while contrarian traders might be turned off by Walgreen's steady climb over the past year, Wiltamuth's call could reflect a sense on Wall Street that the company's improvement prospects still aren't fully baked into the valuation. 

Now what: Jefferies raised its 2015 earnings-per-share view for Walgreen from $4.08 to $4.36 and its 2016 outlook from $5.13 to $5.80. "We are upgrading Walgreens to a BUY rating as the bear thesis of a F2016 EBIT shortfall has now played out and management is now contemplating aggressive change including a possible tax inversion, recapitalization of the company, and more cost cutting," said Wiltamuth. Given Jefferies' solid call-making track record -- currently ranked in the top 15% of our CAPS community -- Fools might want to take a closer look at Walgreen.

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The article Why Walgreen Company Shares Could Spike 20% 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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