While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Shoe Carnival (NASDAQ:SCVL) sank 3% today after Stern Agree downgraded the family footwear retailer from "buy" to "neutral."
So what: Along with the downgrade, analyst Sam Poser reiterated his price target of $33, representing about 19% worth of upside to Friday's close. While momentum traders might be attracted to Shoe Carnival's surge in 2013, Poser believes that the upside is becoming less attractive given the softening sales trends working against the company.
Now what: Stern Agee lowered its 2013 EPS from $1.89 to $1.52 and its 2014 view from $1.77 to $1.42. "SCVL's customer base has been pressured by the government shutdown, which continues to hurt store traffic," Stern Agee noted. "Trends in athletic footwear from key brands are deteriorating in the family footwear channel. There are few fashion footwear trends to offset the weakening athletic sales." When you couple those headwinds with the stock's P/E of nearly 20, I'd agree that Shoe Carnival's risk/reward trade-off isn't all that appealing.
Fool contributor Brian Pacampara has no position in any stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.