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 Sirius XM Holdings (NASDAQ: SIRI ) slipped about 1% this morning after Wunderlich Securities downgraded the satellite radio company from buy to hold.
So what: Along with the downgrade, analyst Matthew Harrigan lowered his price target to $3.80 (from $4.20), representing about 8% worth of upside to yesterday's close. While traders might be attracted to Sirius' potential short-term upside, Harrigan thinks that a sale to Liberty Media (NASDAQ: LMCA ) is becoming less likely and should therefore be valued on a stand-alone basis.
Now what: According to Wunderlich, Sirius' risk/reward trade-off is pretty balanced at this point. "We now apply just a stand-alone value for SIRI as we are skeptical that there will be a material sweetening of the 0.076 exchange ratio (after a 2:1 C stock dividend) on the Liberty Media (LMCA-$129.86, Buy) bid," noted Harrigan. "Our stand-alone target had been $4.00 vs. $4.30 with a deal, but we are now allowing for a slightly lower 1900 S&P 500 assumption on our market-linked valuation, along with a $120 SPX earnings assumption that bumps up the cost of equity and constricts the 'as is' target to $3.80." Of course, with Sirius shares now off about 10% over the past month, it might be a good time for contrarians to grab the built-in optionality.
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.