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 worst and sorriest, too.

And speaking of the best...
No sooner had Delta Airlines (NYSE:DAL) emerged from bankruptcy on April 30 than investment banker UBS decided the shares weren't airworthy. Calling the firm's earnings guidance for 2008 "a bit too rosy" and arguing that they're not worth paying a premium for, the banker downgraded the shares to "reduce" (that's Swiss for "sell") this morning.

Just how much of a premium does Delta command? Over the 12 months ended in March, the company reported $711 million in operating profit, but a $4.3 billion net loss, on revenues of $17.6 billion. Based on the $8.7 billion market cap Delta commanded when its shares began trading last week, Delta was valued at just under 0.5 times its annual sales. For comparison, that's nearly twice the price-to-sales ratios of American Airlines parent AMR Corp (NYSE:AMR), and previous Delta suitor US Airways (NYSE:LCC), and more than twice the valuation accorded to rival UAL Corp (NASDAQ:UAUA).

Commanding higher valuations are discount rivals JetBlue (NASDAQ:JBLU), with a 0.75 P/S ratio, and Southwest (NYSE:LUV) at 1.24. But even among low-cost carriers, Delta's valuation exceeds those of a few competitors, for example ExpressJet (NYSE:XJT) at 0.2.

Meanwhile:

So in a nutshell, what we have here is an airline with close to the worst operating profitability of any of its major rivals. And yet, it's being valued at a price-to-sales ratio that suggests it's top of the heap -- when it just isn't so.

If you ask me, UBS has more than a leg to stand on. What's more, these bankers have a proven record of success, as evidenced by their 91.18 overall rating on Motley Fool CAPS. Unless and until one of its even better-ranked rivals produces a cogent argument for why Delta is worth the price of admission, I'd listen to UBS on this one, folks.

Which CAPS player has the best record on Delta in its oh-so-short history as a newly non-bankrupt company? We've got this air marshal on our radar already. Click here to flag him down. Just don't be surprised when you learn he's no Wall Street analyst, but an ordinary individual investor, like you and me.

Fool contributor Rich Smith does not own shares of any company named above. JetBlue is a Stock Advisor recommendation. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked 276th out of more than 28,000 raters.