This Just In: Upgrades and Downgrades

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 ...
UGGS-ly duckling Deckers (NASDAQ:DECK) upset Wall Street's henhouse with first-quarter earnings that surpassed estimates by nearly 50% on Thursday, and then it laid an egg in the form of a predicted 80% year-over-year drop in Q2 profits. Heedless of the earnings warning, Wall Street wizard Wedbush Morgan decided the firm's long-range target of 25% sales growth and 15% profits growth for the year justified an upgrade -- and so it upped Deckers to "buy."

"About darn time," you say? You're wondering why Wedbush waited until after Deckers had outperformed the market by 66 points over the past year before deciding this was a good company? Good point, but don't be too hard on Wedbush. Wiser Fools than Wedbush have doubted Deckers, our own Bill Mann -- who cut Deckers loose from the Motley Fool Hidden Gems portfolio in December after booking better than a 100% gain for our members -- among them.

Now that we've got a bull emerging from Wedbush, though, it's worth asking whether the firm is relying too much on Deckers' record of past success in opining that there are more profits to come. For clues on the firm's prescience, we once again turn to Motley Fool CAPS to gauge the investment banker's record.

As you may recall, Wedbush started strong. It appeared in this column as the 27th-best-ranked player in all of CAPS-land. Since then, it's fallen upon hard times -- but not too hard, as its current 94.49 CAPS rating still keeps Wedbush comfortably within the top 10% of all CAPS players. Some of its notable successes include:

Then again, the firm has been burned recommending highfliers in the past:

Will its endorsement of Deckers fit snugly into Wedbush's long-term trend of outguessing its peers, or will it more resemble the firm's recent struggles to maintain its lead? I fear that it'll be the latter. With Deckers currently priced at 32 times trailing earnings but expected to grow its profits at just 15% per year going forward, the company looks priced past perfection.

Bill Mann thought Deckers overpriced at just 23 times earnings four months ago, and our respect for the company's performance notwithstanding, it was that valuation that inspired the sell recommendation. On the other hand, Deckers is up a good 30% since Bill decided to fire it from the Hidden Gems portfolio, in a demonstration of how even a pricey stock can become pricier -- and reward shareholders in the process.

Whether you think Deckers will continue to surprise the critics, or whether you agree with Bill and me that the price tag is just too high, is of course up to you. But before you make up your mind, do yourself a favor and find out what the current score leader on Deckers thinks is best. With more than a double on his (her?) hands from this stock, this mystery stock-picker may well understand this stock better than the rest of us combined. Click here to learn her (or was it his?) identity.

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 372nd out of more than 28,000 ranked players. The Motley Fool has a disclosure policy.