The morning session saw shares of residential swimming pool manufacturer Latham (NASDAQ: SWIM) surge by 22% after an upgrade from Stifel analyst, who raised the stock’s rating from Hold (Neutral) to Buy and increased the price target from $3 to $4. The upgrade cited that the stock was “dramatically undervalued,” with the new price target implying a potential 25% upside from the previous trading level.

The market’s reaction to this news indicates a significant impact on the perception of Latham’s business. While Latham’s shares have shown considerable volatility over the past year, such large moves are rare even for this stock, suggesting that the upgrade has notably influenced market sentiment.

The recent notable move prior to the upgrade occurred five days ago, when the stock plummeted by 23.9% following the company’s fourth-quarter results announcement. Latham’s projections for a ~15% decline in new pool installations in its markets for 2024, along with the industry’s expected softness, disappointed analysts’ estimates. However, Latham managed to gain market share in 2023, particularly with its fiberglass pools, which accounted for ~73% of the company’s in-ground pool sales that year. Despite the mixed results, Latham exceeded analysts’ expectations for operating margin and earnings per share (EPS) during the quarter, indicating continued progress for the company.

Following these results, Bank of America downgraded Latham’s rating from Buy to Underperform (Sell) and lowered the price target from $4.5 to $2.6, suggesting a potential 13% downside from the previous trading level.

Despite the recent volatility, Latham has seen a 38.2% increase since the beginning of the year. However, at $3.46 per share, it remains 24.2% below its 52-week high of $4.56 from July 2023. Investors who bought $1,000 worth of Latham’s shares at the IPO in April 2021 would currently be holding an investment valued at $126.79.