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 Nucor (NYSE:NUE) slipped about 1% this morning after Citigroup downgraded the steel giant from "buy" to "neutral".
So what: Despite the downgrade, analyst Brian Yu raised his price target on the stock to $55 (from $52), representing about 2.5% worth of upside to yesterday's close. But while Yu remains positive on Nucor's exposure to a potential construction recovery, he believes that the stock's seemingly lofty valuation leaves little room for error.
Now what: Citigroup thinks Nucor might be too hot to touch right now. "Based on our new commodity price forecasts we are maintaining our EPS estimates for '13 / '15 of $1.43 / $3.75, while lowering '14 from $3.30 to $3.20, and raising our target price $55/sh," noted Citigroup. "However, we are downgrading NUE to Neutral from Buy following the recent share price appreciation as we no longer see sufficient upside over our 12-month time horizon to recommend the name." With Nucor shares up nearly 20% over just the past three months and sporting a forward P/E of 20, I'd agree that the risk/reward doesn't look too enticing at this point.