Why Baxter International, Inc. May Keep Pulling Back

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 Baxter International (NYSE: BAX  ) traded sluggishly on Monday after Goldman Sachs downgraded the medical instrument company from conviction-list buy to buy.

So what: Along with the downgrade, analyst David Roman lowered his price target to $77 (from $83), representing about 16% worth of upside to Friday's close. So while contrarians might be attracted to the stock's weakness over the past month, Roman's call suggests that the competitive pressures holding it down aren't about to let up anytime soon.

Now what: According to Goldman, Baxter's risk/reward trade-off isn't as attractive as it previously thought. "[W]e see the plasma business under greater competitive pressure, putting more of the upside case on the pipeline and raising the stock's risk profile, in our view," said Roman. "Since being added to the Americas [conviction list] (8/6/13), BAX is -7.7% vs. the S&P 500 +8.5%, as our thesis has not played out as fears of looming competition in several key franchises have weighed on share performance." Of course, with the stock off more than 10% from its 52-week highs and trading at a near-3% dividend, those fears might be giving long-term-oriented Fools a decent income opportunity. 

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