Story updated at 9:55 a.m. to reflect market activity.
Shares of Lorillard gained 2% to $52.90 in morning trading.
The bank set a price target of $60 for the cigarette maker. Analyst Judy E. Hong said the company is attractive and the upgrade is based on a sum-of-the-parts valuation.
Hong wrote, "While LO is not out of the woods in terms of the FDA's potential regulation of menthol, we believe we may be entering a period of limited regulatory headline risk and the stars are aligning with the rest of the story as fundamentals remain solid, e-cig category could get another burst with the national entries by MO & RAI, and valuation has de-risked vs. the Staples group."
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Separately, TheStreet Ratings team rates LORILLARD INC as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:
"We rate LORILLARD INC (LO) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth and expanding profit margins. We feel these strengths outweigh the fact that the company has had sub par growth in net income."