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

And speaking of the best...
As the trading week drew to a close Friday, Stifel Nicolaus took a clue from the calendar and closed out its own "buy" recommendation on cable star Comcast (Nasdaq: CMCSA). Observing that after turning a mere 4% revenue gain into 12% improvement in earnings last week (and beating earnings expectations in the process), Comcast had finally topped its $20 price target, Stifel declared the stock now fully valued, and no longer a buying opportunity.

Said Stifel: "We have a difficult time justifying further multiple expansion for [Comcast] given the overhang related to the company's proposed acquisition of 51% of NBC Universal." Mind you, Stifel doesn't take the dim view of this deal that other analysts have expressed. To the contrary, the analyst lines up right beside the Fool's own David Lee Smith in support of the deal. David argued last week that Comcast's ability to "grow its own ad revenues by a whopping 24% ... bodes especially well for Comcast's pending merger with General Electric's (NYSE: GE) NBC Universal unit."

Even so, absent signs of "significant" improvement in housing and unemployment numbers -- two areas Stifel calls "critical to the sustained reacceleration of the company's cable business," the analyst views Comcast's growth prospects as limited. Result: Stifel downgraded the shares to "hold."

But was it right to pull the plug?

Let's go to the tape
After all, predicting the fortunes of media companies such as Comcast is not exactly Stifel's strong suit. Stifel may be superb stockpicker in the adjacent industry of Communications Equipment. In contrast, Stifel only guesses right about 44% of the time on its Media picks:

Why the rush, Stifel?
And I suspect Stifel's wrong on Comcast as well. Rather than boasting of how it was right about Comcast hitting $20, "declaring victory and going home," Stifel should be looking at Comcast's value today, and its prospects relative to the market ... and raising its price target further.

Consider: Relative to the rest of the S&P 500, Comcast sports a forward P/E ratio below that of the index (14.2 versus 15.3) -- but a growth rate far higher (12.7% versus just 9.3%).

And while it's true that Comcast costs more on a forward P/E basis than rivals like Time Warner Cable (NYSE: TWC), Dish Network (Nasdaq: DISH), or DirecTV, the relative lack of value here doesn't negate the fact that as an individual stock, Comcast still seems attractively priced. The company generates monster free cash flow from its business, ($5.1 billion last year), yet the stock sells for only 11 times this sum. And with only 23% of its earnings currently devoted to dividend payouts, it seems to me that Comcast has plenty of potential to boost its already respectable 1.9% dividend payout.

Foolish takeaway
Seems to me that whether you're a growth hunter, value seeker, or a dividend harvester, there's plenty to like in Comcast for investors of all stripes. So personally, I see no reason why this stock can't go higher.