RBC Takes a Cautious Stance on NeuStar

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of NeuStar (ASX: NSR  ) slumped 2% today after RBC Capital downgraded the communication services specialist to sector perform from outperform.

So what: Despite the downgrade, analyst Daniel Perlin raised his price target on NeuStar to $57 per share, representing about 12% worth of upside to the stock's close on Monday. While Perlin thinks that NeuStar's key contract to manage the Number Portability Administration Center (NPAC) will likely be renewed, he believes there's also good chance that it will be renewed at a lower, revenue-pressuring price.

Now what: As a result of the probable top-line slowdown, RBC lowered its 2015 EPS estimate to $3.77 from $4.34. "We believe (NeuStar) shares could remain range-bound until the renegotiation of the NPAC contract is complete or better visibility becomes available," Perlin wrote in a report to investors. Of course, with the stock now off about 15% from its 52-week highs, long-term Fools might want use this short-term uncertainty as a possible entry point. 

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