Wells Fargo (NYSE:WFC) Upgrades Allis-Chalmers (NYSE:ALY)

Allis-Chalmers Energy Inc. (NYSE:ALY) was upgraded by analysts from Wells Fargo & Co. (NYSE:WFC) from market perform to outperform Monday.

At the same time, Wells did lower the valuation of Allis from $3.80-$4.50 to $2.90-$3.45.

Wells Fargo analysts said this in a note to clients, "Although we are lowering our valuation to $2.90-3.45, the high end of our new range still represents potential upside of 40%. Our estimates remain unchanged as lower Rental Service estimates are countered by the accretive impact of the American Well Control acquisition...We expect the increasingly competitive Big 4 to limit the size and profitability ALY can achieve over the next 18 months, especially given its high leverage and inchoate sprawl of lower-end businesses. Even within this context, however, ALY's portfolio of tangible assets, and relationships, thanks to its well-connected, savvy insiders, point to intrinsic value meaningfully higher than its current enterprise value."

Allis-Chalmers close Monday at $2.38, down $0.02, or 0.83 percent.