Analyst Scorecard—Four Hits and Four Misses
A Look at Eight Wall Street Analyst Ratings
Five Stocks Recently Upgraded
Last summer, a little over nine months ago, I wrote a Cabot Wealth Advisory column about how confusing—and often subjective—the ratings issued by Wall Street analysts can be. You can read that column here.
In the column, I listed eight companies whose shares had been recently upgraded, including:
• DragonWave (DRWI): Boost price target to 2 (Canaccord Genuity); Boost price target to 2.75 and change from Reduce to Hold (TD Securities)
• Channel Advisor (ECOM): From Neutral to Buy (B. Riley & Co.) and from Hold to Buy (Deutsche Bank)
• HollyFrontier (HFC): From Buy to Hold (Wells Fargo); From Hold to Buy (Deutsche Bank)
• Investment Technology Group (ITG): From Market Perform to Outperform and boost price target from 21 to 22 (Keefe, Bruyette & Woods)
• Joe’s Jeans (JOEZ): From Neutral to Buy and boost price target from 1.30 to 1.70 (B. Riley & Co.)
• LogMein (LOGM): From Market Perform to Outperform (Cowen & Co.)
• Marathon Petroleum (MPC): Decrease price target from 116 to 100, (Macquarie) and From Neutral to Buy and decrease price target from 96 to 94 (Citigroup)
• QLogic (QLGC): From Underweight to Equal Weight (Morgan Stanley)
Since that time, the Dow Jones Industrial Average has risen almost 200 points. So, just for fun, I decided to go back and see how those stocks have performed since last July. And here are the results.
Four of the companies had great returns. ITG (+81%); LOGM (+47%); MPC (+32%) and QLGC (43%). The other four didn’t fare so well. But the results are actually typical, as analysts tend to be right about 51% of the time. That’s why it’s so important not to blindly follow Wall Street’s advice; you absolutely must do some research on each possible addition to your portfolio to make sure the analyst’s opinion makes sense to you, and also to ensure that the stock is a good fit for your own investment strategy. Of course we can help. Our digest contributors are experts in deciphering research.
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Now, having given you that warning about analyst ratings, I did a bit more research to find a few more stocks that Wall Street has recently upgraded, including:
Akamai Technologies (AKAM), upgraded from Hold to Buy at Deutsche Bank, with an increased price target from 73 to 79. The analyst said, "[W]e see the near-term capitulation in the stock as an attractive entry point into secular growth drivers in FY16+ in Cloud Security and Media Delivery... We see Media Delivery benefiting from growth drivers in Internet Video Streaming, Multi-Player Gaming, etc."
AK Steel (AKS), upgraded to Neutral from Underperform at Credit Suisse, and reiterating a 5.50 price target. 2014 EPS estimates were increased to $0.74 a share from its previous estimates of a loss of $1.02 a share. And 2016 estimates were raised to a loss of $0.74 from a loss of $1.07 a share.
Brightcove (BCOV) was upgraded to Buy by B. Riley ahead of tomorrow’s first-quarter report. Analysts are expecting a loss of $0.05 per share for this online video hosting/monetization platform.
BRF SA (BRFS) was upgraded by Bank of America from a “Neutral” rating to a “Buy” rating in a report released on Wednesday. The Brazilian food processor reported EPS of $0.40 in the last quarter, beating estimates by three cents.
Cameron International (CAM) was upgraded by Wells Fargo from a “Market Perform” rating to an “Outperform” and BMO Capital Markets raised their price target from 57 to 61 and gave the company an “Outperform” rating. In its most recent quarter, this oil services company beat EPS estimates, posting $0.91 per share versus the estimate of $0.81.
It’s an interesting mix of companies, to be sure. But remember, these aren’t recommendations; there are just ideas for further research. Roll up your sleeves, do a bit of investigation, and then decide if any are right for your portfolio.
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