While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Generac Holdings (NYSE:GNRC) slipped 4% this morning after Bank of America/Merrill Lynch downgraded the power generation equipment company from buy to neutral.
So what: Along with the downgrade, analyst Ross Gilardi lowered his price target to $53 (from $65), representing about 9% worth of upside to yesterday's close. So while contrarian traders might be attracted to Generac's price weakness in recent weeks, Gilardi's call could reflect a sense on Wall Street that the company's seasonal pickup prospects are just too limited to trigger a significant rebound.
Now what: Merrill cut its earnings-per-share estimates for Generac by 8%-9%; estimates are now 5% below Wall Street's view. "Our survey suggests limited seasonal demand recovery for standby generators in Q2, undermining our confidence in the 2H14," said Gilardi. Given Merrill's solid call-making track record -- currently ranked in the top 20% of our CAPS community -- Generac bulls might want to at least manage their short-term expectations.
Brian Pacampara owns shares of Bank of America. The Motley Fool recommends Bank of America and Generac Holdings. The Motley Fool owns shares of Bank of America and Generac Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.