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 ...
Intel's (NASDAQ:INTC) blowout quarter report Tuesday night set the stock market on fire, no doubt ... but based on the ratings upgrade Roth Capital just issued, I have to wonder whether the fumes have gone to this analyst's head.

I'm not talking about Intel, of course. Roth missed that boat when it initiated coverage on the stock with no more than a "hold" rating in May. Now the analyst is playing catch-up, and trying to get ahead of the curve by upgrading NVIDIA (NASDAQ:NVDA) before it can report anything as good as what Intel just did. Will Roth succeed, or will it roll over? (Apologies for the retirement account pun.)

Let's go to the tape
Roth has picked a few big winners -- its August 2007 recommendation of IMAX (NASDAQ:IMAX) has more than doubled, while its December 2008 pick of Savient Pharma (NASDAQ:SVNT) turned out to be positively prescient -- a clean triple. And at first glance, Roth's record in semis looks similarly bright and shiny.

Roth has a total of nine semiconductor stocks on its buy list today, all but one of which are beating the market. A couple examples, including the single dog:


Roth Says:

CAPS says:

Roth's Picks Beating (Lagging) S&P By:

Silicon Laboratories



2 points

Atheros Communications 



13 points




(30 points)

That Anadigics pick, however, is instructive. If you dig into the CAPS archives, you'll see that Roth has a history of losing bets in this sector -- it just tends to dump its losers after they head south. (Makes for a prettier-lookin' portfolio, don'tcha know?)

Over the three years we've been tracking its performance, Roth has racked up a record of only 42% accuracy in semis -- worse even than its overall record on CAPS, where Roth gets almost as many picks right as wrong. Sadly for NVIDIA investors, I believe this week's recommendation will prove to be one of Roth's many wrong turns.

Eeenie, meenie, minie, moe, catch a Tegra by the toe
You see, Roth believes that the arrival of Microsoft's (NASDAQ:MSFT) Windows 7 operating system will spark a series of PC upgrades among consumers, and that NVIDIA will gain market share as notebook sales improve. Roth further argues that NVIDIA is positioning itself to profit from the boom in netbooks with its new "Tegra" mobile processor (not an unpopular opinion). Some have even suggested a marriage between Tegra and Apple's (NASDAQ:AAPL) iPhone.

All of which may be true, but ... the real question here is whether NVIDIA will grow fast enough to justify its current price. And from where I sit, the outlook is doubtful.

Now don't get me wrong -- NVIDIA's not quite as much of a dog as it looks at first glance. Growth in research and development and dropping revenue have left this company bleeding $408 million worth of red ink over the last 12 months, as GAAP calculates such things. But in fact, NVIDIA generated $20 million worth of free cash flow of during the same timeframe -- so it's at least cash profitable.

Still, $20 million works out to a price-to-free cash flow ratio of something like 300. Which is patently insane, especially when you consider that, as a group, the two-dozen analysts following this stock don't expect NVIDIA to grow so much as 10% per year over the long term.

Foolish takeaway
Lions and Tegras and ... oh my, it seems the bears have it right on this one. No number of prospects available to NVIDIA can outweigh the fact that right here, right now, the company's simply not making enough money to justify its price.

I would be a seller, not a buyer.

Atheros Communications is a Motley Fool Hidden Gems selection. IMAX is a Rule Breakers pick. Apple, Silicon Labs, and NVIDIA are all Stock Advisor recommendations. Intel and Microsoft are Inside Value picks. The Fool owns shares of Atheros Communications.

Fool contributor Rich Smith does not own (or hold a short position in) any stock named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 675 out of more than 135,000 members. The Fool's disclosure policy is here for your reading pleasure.