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 Francesca's Holdings (NASDAQ: FRAN ) sank 5.5% today after Goldman Sachs downgraded the fashion apparel retailer from neutral to sell.
So what: Along with the downgrade, analyst Lindsay Drucker Mann lowered her price target to $16 (from $18), representing 22% worth of downside to yesterday's close. While contrarians might be attracted to Francesca's share-price decline during the past year, Drucker Mann thinks there's more room to fall given the structural challenges that continue to face the company.
Now what: Goldman expects Francesca's margins to compress, with same-store sales growing modestly, in upcoming quarters. "Our chief concern is that FRAN's multi-quarter stretch of deteriorating fundamentals is structural, rather than cyclical or execution driven," noted Drucker Mann. "Sentiment is already guarded, reflected in 10 days short interest, but we expect further multiple compression toward 13X P/E as fading cyclical headwinds cast a brighter light on FRAN's structural issues." Given the worrisome risks that continue to surround Francesca, it's tough to disagree with Goldman's cautious stance.
More reliable ways to build wealth
One of the dirty secrets that few finance professionals will openly admit is the fact that dividend stocks, as a group, handily outperform their non-dividend paying brethren. The reasons for this are too numerous to list here, but you can rest assured that it's true. However, knowing this is only half the battle. The other half is identifying which dividend stocks, in particular, are the best. With this in mind, our top analysts put together a free list of nine high-yielding stocks that should be in every income investor's portfolio. To learn the identity of these stocks instantly and for free, all you have to do is click here now.