Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
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 AOL, (NYSE: AOL.DL ) slumped 3% this morning after Bank of America downgraded the online content company from buy to neutral.
So what: Along with the downgrade, analyst Joyce Tran lowered her price target to $50 (from $56), representing about 6% worth of upside to yesterday's close. While growth investors might be attracted to AOL's strong revenue of late, Tran thinks that the stock's appreciation potential remains limited given management's disappointing cash flow outlook.
Now what: Bank of America now expects AOL to post 2014 full-year EPS of $2.02 on revenue of $2.48 billion, down from its prior view of $2.55 billion and $2.41 billion, respectively. "While AOL had turned around the advertising business with revenue and profit growth and had a record 4Q, we think our thesis had played out and based on its 2014 outlook, we no longer see upside to our estimates," Tran noted in a report to investors. When you couple that uninspiring outlook with AOL's strong share-price run over the past six months, I'd agree that the risk/reward looks pretty balanced at this point.
More compelling ways to grow
They said it couldn't be done. But David Gardner has proved them wrong time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.