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." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We 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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
It's always sad when bad things happen to good analysts, and yesterday was especially sad for Canaccord Genuity. Long a steadfast defender of "organic light emitting diode" (OLED) specialist Universal Display (Nasdaq: PANL), Canaccord couldn't take the pain anymore after yesterday's disastrous earnings announcement. Seeing UD report a larger than expected loss, and watching the stock crumble 18% in response, the analyst's nerve finally cracked -- and it closed out its "buy" rating.

It was a sad day for Universal Display (UD), a longtime recommendation of our own Motley Fool Rule Breakers team. But it was also a sad day for a great analyst. According to our CAPS stats, Canaccord Genuity currently ranks among the top 5% best investors on the planet. It's Universal Disappointment notwithstanding, it's performed particularly well in this stock's home Electronic Equipment, Instruments and Components industry, racking up big wins at FARO Technologies (Nasdaq: FARO) and Trimble Navigation (Nasdaq: TRMB) en route to a market-thumping 62.5% accuracy record. So what went wrong at Universal Display?

Universal disappointment  
After all, as Canaccord itself admits, UD actually outperformed analyst predictions for revenues in Q1. So it appears the growth thesis here is still intact. The trouble was with ...

  • earnings. UD's $0.31-per-share loss exceeded consensus estimates by a factor of 10.
  • guidance. "Delays in Samsung's Gen5.5 fab" could delay UD collecting additional revenues from its partner by as much as a year.
  • and guidance again. Canaccord worries that Samsung might play hardball with UD over royalty rates on UD tech, raising the potential that UD will "temporarily walk away from" a customer that currently provides more than 70% of its revenues.

I shudder to think how investors might react to that last development, if it comes to pass. Universal Display already has no profits on which to hang a valuation, nor even any free cash flow. Take away its revenues, too, and the stock becomes an exceedingly dicey proposition ...  

Universal optimism
All that being said, and despite downgrading the stock today, Canaccord remains optimistic about Universal Display over the very long term. In fact, at the same time as it ratcheted down its rating, Canaccord upped its price target on the stock -- to $52.

Why? The analyst looks past UD today with its 1% royalty from Samsung, and envisions a day when UD will be able to wring 2% royalties from its major customer. Ultimately, Canaccord believes UD will be able to earn $5 per share some five years from now, and argues the stock is worth at least a 10x multiple to those future earnings -- a price it's willing to pay today.

Well ... maybe not entirely universal
Me, I'm not so sure. The problem with investing on the bleeding edge of tech is that the future's incredibly hard to predict. Case in point: 3-D television. It was supposed to be a big sales driver last year, right? Ask Best Buy (NYSE: BBY) how that worked out for them. (Hint: Sales were down 2% last quarter.) Investors who were gambling on a surge of consumer spending on fancy new 3-D sets to drive profits higher at Corning (NYSE: GLW), which makes the LCD TV glass, or Dolby (NYSE: DLB), which does the sound systems, suffered similar let-downs.

Meanwhile, TV tech continues to evolve at a frightening rate. Maybe Canaccord's right and OLED television displays are the next big thing (and hopefully bigger than 3-D.) Maybe not. What I do know is that right now, shares of Universal Display fetch a sky-high price of 60 times annual sales, versus consensus analyst estimates of 40% long-term earnings growth at the company. Put another way, if UD could wave a magic wand and instantly turn 100% of its revenues into profits -- convince its employees to work for free, get the electric company to give it power gratis, and have Habitat for Humanity build its factories ... the stock would still be overpriced at 60x earnings and a 40% growth rate.

Once you realize that even magic can't save this stock, you don't need a crystal ball to see where it's headed.