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AcelRx Pharmaceuticals (ACRX) Upgraded to Buy: Here’s Why

AcelRx Pharmaceuticals (ACRX) Upgraded to Buy: Here’s Why

AcelRx Pharmaceuticals (ACRX) could be a solid choice for investors given its recent upgrade to a Zacks Rank #2 (Buy). This upgrade is essentially a reflection of an upward trend in earnings estimates — one of the most powerful forces impacting stock prices.

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The Zacks rating relies solely on a company’s changing earnings picture. It tracks EPS estimates for the current and following years from the sell-side analysts covering the stock through a consensus measure — the Zacks Consensus Estimate.

The power of a changing earnings picture in determining near-term stock price movements makes the Zacks rating system highly useful for individual investors, since it can be difficult to make decisions based on rating upgrades by Wall Street analysts. These are mostly driven by subjective factors that are hard to see and measure in real time.

Therefore, the Zacks rating upgrade for AcelRx Pharmaceuticals basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price.

Most Powerful Force Impacting Stock Prices

The change in a company’s future earnings potential, as reflected in earnings estimate revisions, has proven to be strongly correlated with the near-term price movement of its stock. That’s partly because of the influence of institutional investors that use earnings and earnings estimates for calculating the fair value of a company’s shares. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. Their bulk investment action then leads to price movement for the stock.

For AcelRx Pharmaceuticals, rising earnings estimates and the consequent rating upgrade fundamentally mean an improvement in the company’s underlying business. And investors’ appreciation of this improving business trend should push the stock higher.

Harnessing

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JetBlue Upgraded and Downgraded: What’s Next?

JetBlue Upgraded and Downgraded: What’s Next?

JetBlue Airways (NASDAQ:JBLU) stock got a big upgrade from J.P. Morgan analysts last Wednesday. Less than 24 hours later, however, Fitch — one of the three major credit rating agencies — cut the airline’s credit rating to junk territory.¬†

These dueling changes to ratings highlight the substantial uncertainty about airlines’ short- and medium-term prospects. Let’s take a look at the justifications for the analyst moves and what they mean for JetBlue stock moving forward.

JetBlue stock gets a boost

J.P. Morgan analyst Jamie Baker downgraded JetBlue to an underweight rating (the equivalent of sell) in June following a furious rally that saw JetBlue stock surge nearly 90% in just a few weeks. At the time, Baker correctly predicted that airline stocks’ momentum couldn’t last.

JetBlue shares have subsided since then, pulling back about 20% from their early June high. That, along with continued progress toward vaccines, prompted the J.P. Morgan analyst team to turn bullish again. On Wednesday, the brokerage upgraded JetBlue stock to outperform and raised its price target to $17,¬†well above the stock’s current trading price.

JBLU Chart

JetBlue Stock Performance. Data by YCharts.

Interestingly, Baker is not especially bullish about JetBlue’s near-term prospects. He believes that demand is not living up to management’s expectations. However, the analyst argues that the airline will respond to any demand shortfall with additional cost cuts to trim cash burn. Moreover, JetBlue has ample cash to make it through the next year and is well-positioned to capitalize on a rebound in demand in 2022.

Fitch sounds a note of caution

Credit analysts at Fitch were more cautious about JetBlue last week, downgrading its long-term issuer default rating to BB-, or three notches below investment-grade status. Entering March — just before the pandemic crushed U.S. air travel — Fitch’s rating on JetBlue was just

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