This Just In: Upgrades and Downgrades

At The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and worst and sorriest, too.

And speaking of the worst ...
As the Nasdaq plunged to a 10-month low yesterday, shares of Motley Fool Stock Advisor recommendation Garmin (Nasdaq: GRMN) fell further and faster than most, closing down more than 6% for the day. For that, you can thank (at least in part) Wall Street analyst Oppenheimer, which predicted the stock will march in tandem with Mr. Market over the next 18 months, neither beating nor lagging it much.

Citing a slew of risks ranging from a "potential slowdown in the growth" of Garmin's signature GPS products to price competition from rivals like TomTom to contracting profit margins that would result from such competition, Oppenheimer removed its "outperform" rating on Garmin and replaced it with a "perform."

Slowdowns and competition and margin contraction -- oh, my! No wonder investors got spooked yesterday. But is there really cause for worry?

Let's go to the tape
Judging from Oppenheimer's record as a stock picker, investors in Garmin can rest easy. Heck, they might even want to pick up a few extra shares because, from all indications, Oppenheimer is nothing if not a contrarian indicator. Thanks to electronics picks like these ...

... and despite picks like these ...

... Oppenheimer currently has a CAPS rating that we politely refer to around these parts as "Under 20" (less polite folks might call it "20 points from less-than-zero"). The analyst gets nearly twice as many of its picks wrong as it gets right. Even a brilliant call on Nokia (Oppenheimer's fifth-best on record) has a hard time salvaging a record like that.

Foolish takeaway
But what about the risks Oppenheimer warns of? I'll admit: They're there, and they're real. TomTom's not going to endlessly cede market share to Garmin without a fight, and if TomTom starts a price war, Garmin's margins could well contract.

On the other hand, Oppenheimer's warned-of "potential slowdown in the growth" seems less worrisome. Note the modifier: "potential." Note further that the worst Oppenheimer predicts is a "slowdown" in growth -- but slow growth is still growth.

Maybe Garmin doesn't achieve the 22% profits growth that most analysts predict for the coming year. But even if that fear proves correct, it's still a short-term concern. Long-term, the consensus remains that Garmin will grow its profits at an average of 19.5% per year over the next half decade. For a 20 P/E stock that's one-half of a GPS device duopoly, that's an awfully reasonable price to this Fool.