Why Westport Innovations Inc. Is Ready to Rebound

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 Westport Innovations opened up 2% on Wednesday after FBR Capital initiated coverage on the alternative fuel technologist with an outperform rating.

So what: Along with the bullish call, analyst Aditya Satghare planted a price target of $20 on the stock, representing about 19% worth of upside to yesterday's close. While momentum traders might be turned off by Westport's sharp pullback over the past six months, Satghare believes the stock is too cheap to pass up given his view of a profitable business model transformation over the next three to five years.

Now what: According to FBR, Westport's risk/reward trade-off is rather attractive at this point. "Investor sentiment on WPRT remains low, primarily due to concerns surrounding the company's path to profitability," noted Satghare. "We, however, believe that increasing R&D efficiency, management's focus on cost control, and new partnerships for the HPDI 2.0 product and high-horsepower applications should increase investor comfort in Westport's ability to profitably participate in the increasing use of natural gas in the on-road trucking, high-horsepower, and light-duty segments." When you couple that positive outlook with Westport's still-beaten down price -- off more than 50% from its 52-week highs -- it's easy to agree with FBR's bull stance.