Shares of the Houston company at last check traded up 4.8% to $21.02.
The upgrade comes a day after Halliburton beat Wall Street's second-quarter earnings expectations.
Analyst Neil Mehta, who affirmed his price target at $26 a share, said in a research note that he sees "evidence that there is a turnaround underway at the company that can drive a valuation rerate."
"We believe that HAL presents an opportunity at current levels," the analyst said, "given the combination of the recent pullback, a stronger than expected margin outlook through 2023, accelerated deleveraging prospects, and the potential for improving capital return to shareholders through an upsized dividend as early as 2022."
Metha said net-pricing commentary during the company's earnings conference call provided greater conviction that the service markets are likely to be tighter in 2022, especially in U.S. pressure pumping.
"The company expects the North American markets to lead the price increases, followed by a gradual increase in the international markets next year," Mehta said.
Overall, he added, net pricing in 2022, driven by service-market tightening, sets up the company to realize better operating leverage through continued activity increases in 2023.
"We believe that the significant frac equipment attrition that began in second-half 2019 and accelerated in the pandemic has set the stage for a healthier U.S. pressure pumping market as we emerge from the downturn," the analyst said.
Halliburton is the largest U.S. pressure pumper "and is a leader in next generation frac equipment, including tier 4 dual fuel and electric frac fleets," Mehta said.
Halliburton reported second-quarter revenue in North America totaled $1.6 billion, driven primarily by higher pressure-pumping services, drilling-related services, and wireline activity in land, as well as higher well construction activity in the Gulf of Mexico.