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This Just In: Upgrades and Downgrades

Rich Smith (TMFDitty)
October 3, 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." Today, we'll show you whether those bigwigs actually know what they're talking about. To help, we've enlisted Motley Fool CAPS to track the long-term performance of Wall Street's best and worst.

A 40% gain? Can you be Sirius?
On a generally "red" day for the market yesterday, at least investors in Sirius XM Radio (Nasdaq: SIRI  ) were left smiling. Boosted by positive commentary from Bank of America, the stock shot up 4% in Tuesday trading.

But that's not the best news. The best news is that if B of A is right, Sirius investors have only seen the tip of the iceberg on what profits they can expect. According to B of A, Sirius shares aren't worth just $2.67, as they sell for today. They're worth a whopping $3.75 apiece -- and so could rise a further 40% over the coming year.

Applause all around?
B of A isn't the only analyst making positive noises in this industry. At the same time the banker was talking up Sirius stock, another analyst was arguing that Liberty Interactive (Nasdaq: LINTA  ) is also a screaming buy. According to Topeka Capital, Liberty shares that currently cost $18 and change could easily fetch $24 within a year's time, delivering a tidy 29% profit to today's buyers.

Yet the big question here has to be: If B of A and Topeka are projecting 40% and 30%-ish profits for these two stocks, then why did they rise only 4% and less than 1%, respectively, in response to the new ratings? For the answer, we have to look further afield.

A love affair with the American car
Analysts at pointed out yesterday that perhaps the single most important factor affecting sales growth at Sirius (and its rival, Pandora (NYSE: P  ) , as well) these days is the health of the U.S. automotive market. As StreetInsid