Will UPS stock go to $180? One Wall Street analyst thinks so.

Wall Street analysts are very interested inUPS (NYSE: UPS)The company's views are divided. Following the company's recent Investor and Analyst Day presentation, several analysts lowered their price targets on the stock, while Redburn Atlantic analyst Oliver Holmes upgraded his rating from "neutral" to "buy to "Buy" from "Neutral" with a price target of $180. This implies that the stock will rise 18% from its previous price, so let's take a look at the thinking behind this view.

Analysts Upgrade UPS

According to Thefly.com, Holmes believes that UPS is nearing a trough in key metrics such as sales volume and margins. In fact, UPS management believes its volume growth will turn positive in the second quarter and improve throughout the year.

Moreover, the company's 2026 target makes its share price look attractive, mainly due to potential improvements in the revenue side of the company's focus areas, such as SMEs and healthcare. Meanwhile, on the cost side, investments in technology and carpet treatments should keep labor costs under control and increase productivity.

In addition, UPS's growth opportunity comes from winning back customers lost last year due to protracted labor disputes - many of whom shifted shipments for fear of strikes.

Potential Problems with UPS

While I agree with the analysts, there is one issue that makes me a bit cautious about the stock. As previously discussed, an update to first-quarter earnings estimates by Simmons CFO Brian Newman - adjusted operating profit is expected to fall 40% - leaves the company with a lot of work to do if it is to meet its implied guidance for the first half of the year.

In addition, in an industry where demand is currently outstripping supply, Koon is dependent on unit revenue growth. As a result, prudent investors will want to hear Koon's thoughts on full-year guidance for 2024 when it releases its first-quarter results on April 23rd.

The last thing investors want to hear is that UPS is struggling to meet its full-year guidance for 2024, as that would also call its three-year target into question. On a more positive note, don't be surprised if the stock moves higher in late April if management confirms that it is on track to meet its targets and that shipments have turned positive year-over-year or are about to do so.

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Lee Samaha does not own any of the above stocks.The Motley Fool recommends United Parcel Service.The Motley Fool has a disclosure policy.

Will UPS Stock Go to $180? 1 Wall Street Analyst Thinks So was originally published by The Motley Fool.