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, we've got some pretty sharp stock pickers down here on Main Street, 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.

The hot new French cuisine: Apple
Call it "the week of the iPad." Unless you've been living under a rock, you've doubtless heard that Steve Jobs made a surprise appearance to tout Apple's (Nasdaq: AAPL) latest version of the iPad last week. StreetInsider.com summed up Wall Street's reaction in one word: "Gushing." And it's not just the NYC crowd that's impressed. Seems Apple's wunder-toy also has fans in France, because after taking one look at the iPad 2, French megabank Societe General quickly rushed out a "sell" rating on one of the iPad's biggest putative rivals: Motorola Mobility (NYSE: MMI), maker of the new Xoom tablet.

Now, we don't know what it is exactly about the Xoom that offends the French palate. Although it's the third largest bank in France, Societe General isn't exactly a household name here in the U.S. It doesn't release its ratings for score-keeping on Briefing.com, and details on the whys and wherefores behind its ratings are hard to come by. Fortunately, though, Societe wasn't the only banker giving Moto the old heave-ho last week. Local banker Cowen & Co. also downgraded the stock (albeit only to neutral), and Cowen's reasons, at least, were pretty straightforward: The iPad 2 is "much thinner, still-cheaper" than Motorola's rival Xoom. This makes Cowen "less optimistic about the Xoom's near-term prospects."

Game, set, match?
Not so fast. While we may not know much about Societe General's record on tech stocks, we do have a fairly complete record on its fellow-traveler, Cowen -- and the news here, at least, is not good. Over the past five years that we've been tracking this analyst's recommendations, Cowen has racked up a record of just 43% accuracy on its Computer industry picks, and only 31% accuracy in Communications Equipment. Cowen was wrong on Motorola (back when there was only one flavor of Motorola.) Wrong on Nokia (NYSE: NOK). Wrong Research in Motion (Nasdaq: RIMM) and Dell (Nasdaq: DELL) as well:

Company

Cowen Rating

CAPS Rating
(out of 5)

Cowen's Picks Lagging
S&P by

Nokia

Outperform

**

65 points

Dell

Outperform

**

42 points

Research in Motion

Outperform

**

16 points

So whether you view Motorola Mobility today as a cell phone maker, or a tablet comp player -- either way, Cowen's record isn't good.

"But I'm not wrong"
And now ... apologies for the head-fake, but allow me to tell you why Cowen, and Societe General, are nonetheless both right to be so pessimistic about Motorola Mobility today.

Let's start with the valuation. Last year, Motorola Mobility generated free cash flow of $463 million (it also reported losing $86 million under GAAP, but let's not be overkill here). At today's market cap of $7.75 billion, that works out to a price-to-free cash flow ratio of 16.7. Not extreme, certainly. But it is a richer valuation than any of Nokia, Research In Motion or Dell currently sport. Interestingly, it's almost precisely the same price tag that investors are hanging on Apple stock, as a matter of fact.

And yet, according to Cowen compadre BMO Capital, if you add up all the tablet PCs likely to be sold this year by companies-other-than-Apple -- Samsung Galaxies, Hewlett-Packard (NYSE: HPQ) Slates, RIM PlayBooks, and all the rest, altogether they're only going to equal globally sales of the iPad and iPad 2. Approximately 80 different flavors of tablet PC worldwide -- but just two of 'em, both belonging to Apple, are going to sell as strongly as the 78 others, combined. Similarly, in years to come, analysts expect to see Apple grow its earnings at a rate twice than twice as fast as Motorola Mobility's projected 10% pace.

Foolish takeaway
Given a choice between Apple and Motorola Mobility, Wall Street's voting with both hands, and using them to toss Moto overboard. I cannot blame them. Given the choice between paying 17x free cash flow for a 20% grower, or a mere 10% plodder, I know which stock I would pick, too.

That said, if you absolutely, positively feel you need to have "Motorola" in your portfolio, I will repeat the modest suggestion I made back in January: Leave Motorola Mobility to the mo-mo crowd, and take a look at its ugly stepsister, Motorola Solutions (NYSE: MSI) instead. (To find out why, click here.)

Which Motorola do you prefer? Solutions or Mobility? Pick your favorite, and add it to your watchlist here. As a special bonus, we'll give you immediate access to a new special report, "Six Stocks to Watch from David and Tom Gardner.

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. 636 out of more than 170,000 members. The Motley Fool has a disclosure policy.

Apple is a Motley Fool Stock Advisor selection. The Fool has written puts on Apple. The Fool owns shares of Apple.

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