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." While the pinstripe-and-wingtip crowd is entitled to its opinions, down here on Main Street, we've got some pretty sharp stockpickers, too. (And we're not always impressed with how Wall Street does its job.)

Given that, perhaps we shouldn't be giving virtual ink to "news" of analyst upgrades and downgrades. And we wouldn't -- if that were all we were doing. Fortunately, in "This Just In," we don't simply tell you what the analysts said. We 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 ...
The upgrades are in, and Power-One (Nasdaq: PWER) shares are jumping like a cat on a hot tin solar panel. For this, you can thank the friendly analysts at Jefferies & Co.

Taking a brave (and rare) stand, Jefferies swam against the tide of investor sentiment this morning, issuing an upgrade for Power-One. This despite the company's warning of an inventory glut in the solar inverter market earlier this month. Despite (or perhaps because of?) the fact that investors responded to that warning by selling off Power-One shares en masse in a panicked, one-day, 21% drop.

What is it that has Jefferies convinced it's right about Power-One, and that everyone else is wrong? In a word: Sales. According to StreetInsider.com, Jefferies is predicting that the solar industry is going to grow its unit-sales of solar panels by about 15% per year over "the next several years." So even if there's a supply glut on the market today, that's a situation that could change tomorrow. In Jefferies' view, this makes Power-One a play on "direct unit" volume growth, regardless of what happens to the prices of each individual solar inverter unit.

For the record, Jefferies admits that average selling prices for solar inverters could "decline by 8%-10% in 2011." But if the losses are any less than that, Jefferies argues Power-One could easily earn $1 a share, even in 2011. With the shares costing only $9 apiece today, the analyst argues the stock's easily cheap enough to buy. Is Jefferies right?

Let's go to the tape
I wish I could give you a clear-cut yes-or-no answer on that one, but in fact, the record's a bit unclear here. Overall, Jefferies inarguably ranks among the better analysts we track here at CAPS, outperforming roughly 88% of the investing universe. Its record within the solar power industry, however, is a bit less sunny. Over the five years we've been covering the company, Jefferies has been right about Trina Solar (NYSE: TSL) being a "buy," but wrong about MEMC Electronic Materials (NYSE: WFR). It called EnerSys (NYSE: ENS) correctly, true, but fumbled the ball on SunPower (Nasdaq: SPWRA) -- twice in a row!

Company

Jefferies Said

CAPS Says

Jefferies's Picks Beating (Lagging) S&P by

EnerSys Outperform ** 77 points
Trina Outperform ** 22 points
MEMC Electronic Outperform ** (65 points)
SunPower Outperform * (72 points) (picked twice)

And when you get right down to it, only 40% of Jefferies' picks in the semiconductor industry (technically, solar panels are just really big semiconductors), and only 31% of the analysts recommendations in the Electrical Equipment industry, have outperformed the S&P 500 over the last five years. Hardly an inspiring record.

Time to flip the switch on Power-One?
Considering the analyst's checkered past on solar stocks, then, you might be surprised to learn that I actually agree with Jefferies on its latest pick. Here's why:

For one thing, while nominally going "against the grain" on this one, Jefferies' opinion that Power-One is a "buy" actually aligns quite nicely with the consensus opinion on CAPS, where 93% of investors polled expect the company to outperform the market going forward. What's more, the more successful an investor is -- the more likely she is to agree that Power-One is a "buy" -- fully 97% of our very best investors, the CAPS All-Stars, rate this stock an outperformer.

And I agree with them. Consider: Selling for less than 10 times trailing earnings, and under 7 times forward earnings expectations, Power-One really doesn't have a lot of growth-hype baked into its stock price today. While Wall Street continues to project 21%-plus earnings growth rates for the company, over the long term, short-term worries currently have the stock trading as if it's only going to grow half that fast -- or less.

I don't think that's realistic. Sure, in the short term, the going might get rough. Take Jefferies' projection of 15% unit-volume growth in solar, and subtract the 8% to 10% for industry ASP declines, and we could see only mid-teens growth for Power-One in 2011. Longer-term, however, the analyst notes that Power-One is "the second-largest manufacturer of solar inverters, after market leader SMA." Efficiencies of scale alone, therefore, should help mitigate the margin concerns at Power-One. Meanwhile, the company boasts beefier profit margins than other popular electrical equipment stocks, such as the superbly named American Superconductor (Nasdaq: AMSC) and industry giant Emerson Electric (NYSE: EMR) -- and last quarter, Power-One grew its sales more than 10 times as fast as Emerson!

Foolish takeaway
Worst case, I have to say that when I look at Power-One, its potential, and its competitive position, 10 times earnings really doesn't look like "a lot to pay for this muffler." Add in the potential that Wall Street is over-doing the margin concerns, and that Power-One could exceed expectations (as it's done in each of the last four quarters), and I actually agree with both Wall Street and the Main Street CAPS community on this one: Power-One could light up your portfolio.

Emerson Electric is a Motley Fool Income Investor pick, and The Fool owns shares of Power-One, but Fool contributor Rich Smith does not own (nor is he short) shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 654 out of more than 170,000 members. The Motley Fool has a disclosure policy.

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