Image source: Aaron's. 

What happened

Shares of rent-to-own retailer Aaron's Inc (NYSE:AAN) took a hit today after Raymond James downgraded it all the way from Strong Buy to Market Perform. As of 3:13 p.m. EST, the stock was down 10.2%.

So what

Analyst Budd Bugatch downgraded the retailer for two reasons. The first reason was valuation-based as the stock had almost hit Bugatch's price target of $34, which he removed. The second was due to downbeat preliminary earnings at rival Rent-A-Center (NASDAQ:RCII), which said it would report a surprise loss for its fourth quarter as comparable sales fell due in part to problems transitioning to a new point-of-sale system. 

Rent-A-Center management also indicated that the competitive landscape remained challenging, which helped prompt the downgrade.

Now what

Prior to today's sell-off, Aaron's stock had gained 45% since its last earnings report at the end of October, so on a valuation basis, the downgrade may be justified. Like Rent-A-Center, Aaron's projected a slide in same-store sales, but it still sees bottom-line profits improving. Perhaps the downgrade was justified, but Aaron's still seems to be in a much stronger position than Rent-A-Center. I see no reason to change your investing thesis based on today's news.

Jeremy Bowman has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.