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 ...
Multinational megabank Citigroup gave its stamp of approval yesterday to one of our own favorite companies: Motley Fool Stock Advisor recommendation Omniture (NASDAQ:OMTR). But while we know that the bank initiated coverage of the online metrics measurer with a "buy" rating, that's about all we do know. News reports on the move give no additional context to Citigroup's rationale.

There are few situations more frustrating to an individual investor than the one Omniture owners find themselves in today. We know that a "name" investment bank likes the stock, but we don't know why. Is the bank courting a bond offering? Has it heard rumors of a private equity buyout? Or does it just plain think the stock is cheap? We don't know.

What we know
We do know that Motley Fool CAPS keeps close track of Citigroup's calls. Whatever the underlying rationale, we monitor the bankers' upgrades and downgrades, and measure how well those predictions pan out. While evaluating Citigroup's logic on any given stock rating remains problematic, we at least have a way of evaluating whether the bank is generally "smart" or not.

So is it?
As a matter of fact, it is. Just shy of the coveted "Wall Street's Best" title, Citigroup is definitely an "All-Star" stock picker, scoring a 86.80 combined rating on CAPS. Reviewing a few of its more interesting tech-ish calls over the last few months, we find:

... while its lesser performers include:

Foolish takeaway
Overall, I'd have to say that Citigroup's record on Web-related companies is "mixed." Investors probably shouldn't take any given call as gospel without knowing more about the assumptions on which Citigroup relied in deciding to recommend a stock.

That's particularly true when you consider that the "given call" today, Omniture, recorded neither net profits nor positive free cash flow over the last 12 months, and trades at a pricey 60 times next year's earnings estimates. That said, Omniture has treated Motley Fool Stock Advisor very well indeed since we recommended the stock back in December, returning 65% gains over the last six months, against just 7% appreciation in the S&P 500. So while I personally wouldn't pay up for the stock at today's price, and wouldn't pay much attention to Citigroup's opinion without knowing more about its basis, I can understand why investors might take the double endorsement from Stock Advisor and CAPS All-Star Citigroup and take a flyer on this highflier.

If you'd like further information on the stock before making your own decision, we've got two options for you -- both free of charge.

First, you can visit Omniture's CAPS page, and see what the current score leader has to say about the stock. This Fool has racked up an even-better-than-Stock Advisor margin of victory on Omniture, trouncing the market by an incredible 156-point margin on this stock. Second, you can discover David Gardner's entire write-up on Omniture by taking a free 30-day trial of Stock Advisor. The choice is yours. Like I said, either way, free is free, and you can't beat that price with a stick.

Disclaimer: The ASPCP (American Society for the Prevention of Cruelty to Prices) does not under any circumstances approve of beating prices with sticks.

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 ranked No. 727 out of nearly 30,000 raters. NetEase and Akamai are Motley Fool Rule Breakers picks, while Sina is a Stock Advisor selection. The Fool's disclosure policy comes up heads every time.