Shares of Mentor Graphics Corp. climbed Tuesday after a JPMorgan analyst upgraded the software maker's stock, predicting that spending on electronic design automation software will improve next year and Mentor may benefit from this earlier than others.
Mentor Graphics shares rose 80 cents, or 10.9 percent, to $8.17.
In a client note, JPMorgan analyst Sterling Auty upgraded the shares to "Overweight" from "Underweight" and raised his price target by $1.50 to $10.50.
Auty said that Mentor Graphics recognizes more revenue from contracts it signs up front than competitors, who mostly recognize revenue over the life of a contract.
Because of this, its revenue is a good indicator of the health of spending on electronic design automation software, he said.
"We expect that spending health to improve in 2010 and, because of the timing of renewals, Mentor may see a boost a little earlier. Combine these items with very low current expectations for the stock, and we think you get a recipe for outperformance," he said.