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 Tiffany (TIF) slipped slightly in pre-market trading after Goldman Sachs downgraded the jewelry retailer from conviction buy to buy.
So what: Along with the downgrade, analyst Lindsay Drucker Mann lowered his price target to $100 (from $101), representing about 10% worth of upside to Friday's close. So while growth investors might be attracted to Tiffany's progress over the past year, Drucker Mann's call could reflect a growing sense on Wall Street that the stock is getting a bit ahead of itself.
Now what: According to Goldman, Tiffany's risk/reward trade-off isn't quite as attractive as previously thought. "The key drivers of our bullish view have been (1) robust gross margin expansion on the back of lower input costs and diminished negative product mix, (2) stepped-up free-cash conversion, and (3) a healthy comp sales dynamic, with ongoing strength overseas and a nascent acceleration in the US," noted Drucker Mann. "While the 4Q report reinforced our confidence on the comp story, it also brought to light that the margin and cash components we anticipated now seem like they will take a bit longer to materialize." When you couple those slightly lowered expectations with Tiffany's hot stock price, it's tough to disagree with Goldman's downgrade.