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 track the long-term performance of Wall Street's best and brightest -- and its worst and sorriest, too.

And speaking of the best ...
As morning broke across America today, the markets turned a bright shade of red. Contributing to the day's ruddy hue was .pdf specialist Adobe (Nasdaq: ADBE), which has already dropped 6% in response to a downgrade from CAPS All-Star Jefferies Group.

Six percent -- that's quite a drop. But it's to be expected, given the magnitude of the downgrade. You see, Jefferies didn't just take Adobe down a notch. The banker did a complete 180 this morning, dropping Adobe all the way from "buy" to "underperform." Ouch. Citing just-completed "industry checks," Jefferies warned of a sequential drop-off in sales of Adobe's Creative Suite 3 in January, and predicted we'll see further softness in Adobe's business going forward.

Sounds ominous. But before we panic (well, judging from the stock drop, many people already have succumbed, but before you join in ...), let's look at Jefferies' record, and see if this analyst is really "all that."

Let's go to the tape
Judging from its record on CAPS, Jefferies is good -- if not quite as good as it thinks it is. The banker owes its place in the top 20% of investors to a series of superb stock picks that include:

Company

Jefferies Said:

CAPS Says (Out of 5):

Jefferies' Pick
Beating S&P by:

BEA Systems (Nasdaq: BEAS)

Outperform

***

47 points

Google (Nasdaq: GOOG)

Outperform

**

20 points

VMware (Nasdaq: VMW)

Outperform

***

16 points

And yet, if you look closer, you'll see that Jefferies actually gets more of its picks wrong than right. A few of its losers:

Company

Jefferies Said:

CAPS Says:

Jefferies' Pick
Lagging S&P by:

Boyd Gaming (NYSE: BYD)

Outperform

***

39 points

USG Corp (NYSE: USG)

Outperform

****

28 points

j2 Global (Nasdaq: JCOM)

Outperform

****

19 points

So overall, Jefferies has a decent record in the software industry. Jefferies gets the odd software-ish pick wrong, but not as wrong as some of its stinkers in other sectors. And while I'm tempted to rag on Jefferies for getting its last Adobe call wrong (Jefferies recommended the stock on Dec. 11, 2006, and underperformed the S&P 500 on that pick), two things prevent me.

First, Jefferies says the facts have changed. The analyst sees sales weakening at Adobe and is making the logical call in response. Second, I have been wrong on Adobe in the past. I rated this stock an underperformer in September 2006 on valuation grounds, was wrong about that, and underperformed the market by a couple of points as a result -- so I'm leery of throwing stones in this, my glass house.

Foolish takeaway
So is Adobe a "sell" now, or isn't it? After reading all the above, you may be surprised to hear that I'm not entirely convinced Adobe is a sell. You see, the reason I rated it a likely underperformer way back when was because the stock's price seemed too steep relative to the rate at which Wall Street expected it to grow. That's no longer the case, or at least not clearly so.

Sure, Adobe still looks pricey on a surface level. Its 28 P/E is far above the market average. But with $1.3 billion in free cash flow under its belt over the past four quarters, a stock price just 15 times that sum, and growth still projected at about 14%, Adobe looks, at worst, "fairly priced" to me.

Throw in the fact that Adobe's Creative Suite 4 is coming out later this year, and consider that customers might be waiting on its advent before buying -- which could explain the slowdown in Creative Suite 3 sales that has Jefferies spooked -- and I see real possibilities for this stock to outperform going forward.

So while Adobe's not yet priced to "buy," I don't think it's quite the "sell" that Jefferies is saying, either. Call this one a "wait-for-better-prices" stock.

Disagree? Feel free. Come on over to Motley Fool CAPS and tell me why Adobe's a screaming buy -- or a run-away-screaming sell.

USG is a pick of Inside Value and j2 Global is a Motley Fool Hidden Gems Pay Dirt choice. Try any of our investment newsletter services free for 30 days.

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. 369 out of more than 83,000 players. The Fool has a disclosure policy.