Why Potash Corp. Shares Could Stall

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 analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Potash Corp./Saskatchewan (NYSE: POT  ) slipped 1% in premarket trading Wednesday after TD Securities downgraded the fertilizer giant from buy to hold.

So what: Along with the downgrade, analyst Greg Barnes reiterated his price target of $39, representing about 9% worth of upside to yesterday's close. While contrarians might be attracted to PotashCorp's recent price weakness, Barnes' call could reflect a sense on Wall Street that industry headwinds are just too strong to allow for a significant rebound.

Now what: According to TD, PotashCorp's risk/reward trade-off isn't too attractive at this point. According to Barnes:

With crop prices declining sharply on the back of record forecast production and potash demand expected to soften in H2/14, we are lowering our recommendation on PotashCorp to HOLD (from Buy). We have updated our forecasts for Q2/14 ahead of the company reporting its Q2 results on July 24 (prior to the market open). Last week, the USDA published its July WASDE report that continues to highlight that in 2014, the corn crop is expected to be only slightly below (- 0.5%) the record bumper crop in 2013.

Given PotashCorp's still-juicy 3.5% dividend yield, however, those short-term concerns might be providing patient Fools with a solid long-term income opportunity.

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