Don't let it get away!
Keep track of the stocks that matter to you.
Help yourself with the Fool's FREE and easy new watchlist service today.
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 Orbitz Worldwide, (NYSE: OWW ) sank about 5% in premarket trading Wednesday after Goldman Sachs downgraded the online travel company from neutral to sell.
So what: Along with the downgrade, analyst Heath Terry planted a price target of $8 on the stock, representing about 11% worth of downside to yesterday's close. So, while momentum traders might be attracted to the stock's strength in recent months, Terry's call suggests growing sentiment on Wall Street that Orbitz's valuation is becoming a bit stretched.
Now what: According to Goldman, Orbitz's risk/reward trade-off is rather unattractive at this point. "With Orbitz up 23% ytd versus the group up 5%, and the stock trading at a premium to the group on a growth relative basis, we believe Orbitz has an incrementally higher risk profile due to slowing growth as it annualizes its white label agreement with American Express, the expiration of its exclusive Kayak relationship, and contra revenue growth from its new loyalty program," said Terry. "We also believe the shift to mobile/meta will drive share consolidation among the larger OTA's multiple brands." When you couple that downbeat outlook with Orbitz's steep-ish forward P/E of 20, it's tough to disagree with Goldman's bearishness.
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.