Shares of General Dynamics (NYSE: GD) about 1.25% Thursday morning following a price target raise by Bank of America/Merrill Lynch to $260.00 (from $245.00) with a Buy rating.

Analyst Ronald Epstein believes GD offers investors an undervalued defense option possessing strong business jet demand. The analyst believes the strong bizjet demand offers cyclical growth opportunities from defense noting and expectation from "stronger demand for large business jets, the defense upcycle, and tax reform to provide strong organic growth."

The analyst says the company's Q4 report showed that large cabin bizjet orders were strong which trumps the prevailing sentiment regarding weak demand. Epstein expects the company to post 7.5% CAGR (compounded annual growth rate) growth for Aerospace between 2017 and 2021. Tax benefits should also boost the share price.

The new target of $260.00 is rough 19% above Wednesday closing price of $219.45.

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