Friday'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, our headlines feature cloudy forecasts for both SunEdison (NYSE: SUNE  ) and SunTrust (NYSE: STI  ) . Brighter tidings await one stock, however, so let's head (almost) all the way over toward the land of the rising sun, and find out why one analyst says...

Noah Holdings floats his boat
One of the biggest gainers this morning is the stock you've probably never heard of: Noah Holdings Ltd. (NYSE: NOAH  ) . A big player in a niche industry, Noah provides wealth management products to customers in China. With China being one of the fastest growing countries on the planet, it's clearly a good place to do business.

This morning, analysts at Oppenheimer threw their support behind Noah, upgrading the shares to "outperform," and assigning an $18 price target. Noah shares are responding positively to the news, up more than 15% already as of this writing. But are they worth it?

That's hard to say. If you apply the traditional rule of thumb for valuing asset managers -- 2% of the company's $1.2 billion in assets under management -- then Noah's $823 million market cap looks clearly excessive. Then again, few American asset managers are growing at the pace Noah sets -- 25% annualized profits growth estimated over the next five years.

Between that growth rate, and Noah's 1.1% dividend yield, the stock's 28.5 P/E ratio looks much more reasonable. I don't know that Noah will go to $18 per share like Oppenheimer says it will, but at today's $15 per share valuation, the stock may not be as expensive as it looks.

Sun dims
Moving on now to the "sunny" side of the Street, analysts are raining on the parade at SunEdison and SunTrust Banks this morning. Let's take those one at a time, beginning with SunEdison.

SunEdison, the solar wafer manufacturer formerly known as MEMC, admitted to missing earnings Wednesday, reporting a $0.19 loss in Q2, $0.06 worse than analysts had expected. This morning, the shares got punished by a downgrade to hold from Ardour Capital.

Investors are selling off the stock in response, and I don't blame them. Unprofitable today, bearing more than $2 billion in net debt, and burning cash at the rate of $626 million per year at last report, SunEdison is clearly a company in dire straits. Shareholders may be upset by today's downgrade, but if you ask me, Ardour cut this company a break in only downgrading to hold. With numbers like these, the stock could just as easily have been cut to sell.

Will SunTrust come out tomorrow?
A second "sun" stock getting hammered this morning is SunTrust. Last month, SunTrust investors received good news in the form of a price target hike to $36 per share from analysts at Jefferies. This morning, expectations moved the other way, as analysts at Argus Research set a price target of $35, and reduced their rating to hold.

Here, though, I think the analyst may be too pessimistic. Priced at less than nine times earnings today, but expected to grow these earnings at 10% annually over the next five years, SunTrust shares simply don't look that expensive to me. Add in a modest 1.1% dividend, and I'm almost tempted to call them "cheap."

The stock sells for less than book value -- 0.9 times book, in fact -- right in line with the TV valuations at major megabanks such as J.P. Morgan, Bank of America, Citigroup. Long story short, I see SunTrust shares as, at worst, fairly valued, and potentially... cheap enough to buy.

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