This Just In: Upgrades and Downgrades

Here at The Motley Fool, we poke plenty of fun at Wall Street analysts and their endless cycle of upgrades, downgrades, and "initiating coverage at neutral." So you might think we'd be the last people to give virtual ink to such "news." And we would be -- if that were all we were doing.

But in "This Just In," we don't simply tell you what the analysts said. We'll also show you whether they know what they're talking about. To help, we've enlisted Motley Fool CAPS, our tool for rating stocks and analysts alike. With CAPS, we'll be tracking the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
As the trading week drew to a close on Friday, shares of multimedia content streamer and Motley Fool Rule Breakers pick Akamai (NASDAQ:AKAM) leapt 8%. Whom should investors thank for the sudden surge in their shares? Investment house WR Hambrecht, which upgraded the shares to a "buy" rating.

According to Hambrecht, fears of increased competition from rivals like Level 3 (NASDAQ:LVLT) and Limelight Networks  (NASDAQ:LLNW) had pushed Akamai's shares down to only (only!?) a 40% gain over the past 52 weeks, making the shares once again "buyable." Hambrecht also sees potential for growth with the advent of Apple's (NASDAQ:AAPL) iPhone, arguing that such "rich-media capable handheld browser devices will ... drive incremental revenues toward established content delivery network providers" such as Akamai.

How likely is it that Hambrecht understands Akamai better than the people who sold off the shares after last quarter's earnings news? For clues to Hambrecht's stock-picking prowess, we turn once again to Motley Fool CAPS for a glimpse at the firm's record.

There we learn that while Hambrecht doesn't quite merit the title of "Wall Street's Best," it is clearly an All-Star investor, scoring a 93.69 combined rating on CAPS. Helping it earn this score were the following picks -- its three best since we began tracking Hambrecht:

Foolish takeaway
There's no arguing that Hambrecht is a smart stock picker. The firm's record speaks for itself. And those top three picks? Wow.

And of course, I find it encouraging to see that Hambrecht's opinion dovetails with that of the Fool's own tech guru Tim Beyers, who picked the stock for our Rule Breakers portfolio two years and 266% ago.

Still, while these learned souls both argue that Akamai has potential and a price that's nice (or at least nicer than it was two months ago), the value investor remains to be convinced. Yes, I see that analysts think Akamai will grow its profits 35% per year over the next five years. But as I've said before, past is perfect and future is fiction. While I have no reason to say that 35% won't materialize, I also have no certainty that it will. What I am certain of is that Akamai shares sell for 120 times trailing earnings and 90 times trailing free cash flow. That's an awful steep price to pay for an uncertain future.

Fools of a feather rarely fly together. Read why Tim Beyers and the gang at Motley Fool Rule Breakers think Akamai's a buy, my own misgivings notwithstanding. You can get unfettered access to their analysis, free of charge, when you sign up for a free one-month trial to the service.

Fool contributor Rich Smith does not own shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 350 out of nearly 30,000 rated players. The Fool has a disclosure policy.