NEW YORK (TheStreet) -- Gray Television (GTN) - Get Report spiked on Wednesday after Wells Fargo upgraded the Atlanta-based TV broadcaster to "outperform" from "market perform," boosting its 12-month price target to $13 to $15 from a prior $12 to $14.

"For GTN, we like the potential for M&A, net retrans growth, and political exposure and see potential upside to estimates," said analyst Wells Fargo Marci Ryvicker in the report.

Gray will likely remain involved in M&A action over the year, both as a buyer and seller, Ryvicker said. In the short term, management continues to focus on acquiring highly-rated stations in local domestic markets with exposure to above-average political spend. Most recently, the company acquired Hoak, a Dallas-based broadcaster, for $342.5 million. The transaction is expected to close in the second quarter.

"This is where GTN operates best, as it is predominantly in DMAs [designated market areas] ranging from 60-200 with #1 or #2 ranked stations (mostly spread out over heavy political markets in the Midwest and Southern parts of the U.S.)," Ryvicker added.

"That said, at just 7% U.S. TV households (well below the 39% cap), we would not be surprised if the company is an eventual seller (something they've already indicated they were open to), given its growing portfolio of attractive assets in political markets," she said.

Wells Fargo also points out Gray Television is in the process of renegotiating its entire sub base through to the end of 2014. Of Gray's 6 million-strong base, it was receiving slightly below-average rates, a trend likely to change as the company builds out its highly-rated station portfolio and as management toughens its stance.

Potential risks to Wells Fargo's thesis include softness in the broader economy which would trickle down to advertising pullback in local markets and the challenges associated with the FCC's regulation of M&A action.

Wells Fargo forecasts EPS of 34 cents in 2013 (fiscal year ended December) and $1.23 a share in 2014. The firm is slightly more bullish than analyst consensus of 33 cents a share in 2013 and $1.21 a share in 2014, according to those surveyed by Thomson Reuters.

By late morning. shares had added 3.1% to $10.94. Since the beginning of 2013, the stock has surged 494.1%. 

TheStreet Ratings team rates GRAY TELEVISION INC as a Hold with a ratings score of C+. The team has this to say about their recommendation:

"We rate GRAY TELEVISION INC (GTN) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. Among the primary strengths of the company is its solid stock price performance. At the same time, however, we also find weaknesses including deteriorating net income, poor profit margins and weak operating cash flow."