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This Just In: More Upgrades and Downgrades

Rich Smith
June 18, 2012

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." While the pinstripe-and-wingtip crowd is entitled to its opinions, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given this, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We also show you whether they know what they're talking about.

Unfortunately for investors -- and contrary to what you might expect considering the election results out of Greece -- most of the talking is down, as analysts take an ax to the ratings at Celgene (Nasdaq: CELG  ) and Huntsman (NYSE: HUN  ) , and do a real number on the numbers at II-VI (Nasdaq: IIVI  ) .

Time to sell Celgene?
Analysts at RBC Capital Markets aren't quite ready to recommend selling Celgene -- but they're not far from it. RBC cut its rating to "sector perform" this morning, and knocked the price target down to $72.

Granted, this move still seems to leave room for 9% upside in the stock, and not everyone's as pessimistic as RBC. Wells Fargo, for example, just had a meeting with management and came away impressed. In a note that came out shortly after RBC's downgrade, Wells reiterated its belief that the stock will "outperform" the market, arguing that Celgene's Revlimid "is poised for solid growth in Q2," which was already working out pretty well in any case.

On balance, Wells seems to have the better argument here. Priced at 20.5 times earnings, and with free cash flow that's superior even to reported earnings, Celgene shares look attractively priced even if they should fall a bit short of consensus expectations for 25% growth. If Wells is right -- if it didn't just get snookered by management happy talk -- and growth is going as planned, the stock could very well be a "buy" at today's prices.

KeyBanc and the Huntsman
A second bargain in the making, but getting unmade on Wall Street, could be Huntsman Corp. The specialty chemicals maker sports a zippy 17% earnings growth rate, a generous 3.1% dividend, and a bargain-basement P/E of less than 9. KeyBanc, however, worries that "the Company's exposure to Europe and slowing growth rates in China coupled with its above average leverage will likely weigh on shares in the near term, limiting upside potential." (And indeed, with $3.4 billion in net debt, Huntsman is pretty heavily leveraged, with a higher debt-to-capital ratio than Dow Chemical (NYSE: DOW  ) , which carries a $17 billion net debt load yet seems to have no trouble getting inv