Monday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on.

Today, we'll find miners stuck between a rock and a hard place, dollar stores perhaps taking their moniker too literally, and a risky acquisition starting to pay off. Read on for all the nitty-gritty details.

Entropic: Stick a Trident in this growth story
First up is media and networking chip designer Entropic (Nasdaq: ENTR  ) . Needham just started covering the stock with a "buy" rating and $8 price target, causing a 4% overnight jump to $5.60 but still leaving plenty of room for gains.

According to Needham, the recent pre-announcement of second-quarter results set the baseline, not a ceiling, for further strong results. The buyout of defunct rival Trident's set-top box chips gives Entropic a shot at stealing market share in a growing market. Investors have been chewing their nails over that bankruptcy buyout, but Needham sees nerves settling down thanks to that cheerful results update.

Entropic is tightly tethered to the digital living room, as both its networking and media assets play into the rise of digital video. It's a hotly contested market where nothing comes easy, but the Trident purchase broadened Entropic's target markets enough to keep the company relevant for the foreseeable future. And the company's debt-free balance sheet helps it withstand market storms that would have killed a stand-alone Trident.

I like Needham's call here so much that I'm playing along with a bullish CAPScall of my own. We missed the market bottom, but there's plenty of bounce left in this spring-loaded stock.

Dollar Tree: Time to treat the name as a metaphor
Morgan Stanley just slapped a "sell" rating on discount store chain Dollar Tree (Nasdaq: DLTR  ) with a $45 price target. Among many other risk factors, Morgan Stanley is getting nervous about the company's pricing strategy.

"We believe investors under-recognize Dollar General's increasing focus on the $1 price point," said the firm. That's bad enough to outweigh Dollar Tree's minuscule exposure to European risk, and the stock has seen some outrageous gains over the last five years anyhow -- time to step to the sidelines until management comes to its senses!

I'd agree that blind attachment to Dollar Tree's eponymous $1 prices doesn't make sense in the face of ever-present inflation. At some point, the company simply must adjust to economic reality and accept a move to higher prices. And hey, it's not "The $1 Tree" -- low dollar amounts on the store's price tags still qualify for the moniker.

The stock has indeed gotten a bit ahead of itself, trading at 25 times trailing earnings and nearly 13 times the company's enterprise value -- rich price tags indeed for a mature retailer. I'd stay on the sidelines as well, watching Dollar Tree grow into its valuation from afar.

Pan-American miners: Stuck in a dark cave
Finally, Deutsche Bank took a look at North and South American mining stocks -- and came back with a sock full of coal.

Analyst Jorge Beristain slashed target prices on 11 miners by about 10% each. Outliers from that trend include Pan American Silver (Nasdaq: PAAS  ) , which got a 29% target cut from $31 to $22, and Cliffs Natural Resources (NYSE: CLF  ) , whose value estimate fell 24% to $80.

Beristain cited macroeconomic factors to support these target cuts. Commodity prices are dropping fast, local governments are taking ownership of "a larger share of the mining profits," and foreign exchange rates give American miners another headwind that Asian and European operators don't have to fight.

The firm believes in a turnaround later in the year, fueled by "some level of government intervention to stimulate waning growth." But that growth driver likely won't come into play until the fourth calendar quarter.

That being said, Deutsche doesn't downright hate American mining stocks. The firm still has a "buy" rating on Cliffs, Freeport-McMoRan (NYSE: FCX  ) , and three more stocks under the price-target ax today. Pan American swooned to a modest "hold" grade, but Beristain doesn't advocate selling any of these stocks right now.

You'll laugh at this optimistic market view if you believe that the other shoe is about to drop on this shaky global economy. Me, I'm convinced that Europe will find a way not to fall apart in a blaze of burning euros, and that economic activity still has a lot of recovery left to do. As such, I'd agree that metal miners of every ilk are poised for a second-half comeback, and commodity producers in the steel and iron trades more so than the precious miners.

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Fool contributor Anders Bylund holds no position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Freeport-McMoRan Copper & Gold. Motley Fool newsletter services have recommended buying shares of Pan American Silver. The Motley Fool has a disclosure policy.

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