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 stock pickers, 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 ...
Stifel Nicolaus is indeed one of the finest analyst firms on Wall Street, judging by its performance in our CAPS system. Stifel is particularly strong in the field of Internet services, where it gets an almost scary 77% of its active picks right, including these big winners:
|
Company |
Stifel Nicolaus Rating |
CAPS Rating |
Stifel Nicolaus Beating S&P by |
|---|---|---|---|
| Rackspace Hosting | Outperform | *** | 592% |
| Dice Holdings | Outperform | * | 113% |
| SINA | Outperform | *** | 89% |
With a track record like that, you'd be wise to sit up and take notice when Stifel shuffles its buy-hold-sell ratings in the Internet sector. And that's what happened Friday: Stifel raised Expedia
The upgrade rides on Expedia's plan to split itself in two by spinning off the TripAdvisor business as a separately traded entity. That move is "a major catalyst for unlocking value" in the stock, if you ask Stifel, and is a dramatic change of pace from management's earlier unwillingness to make any dramatic changes.
The social-networking flavor of TripAdvisor makes that division a very different beast from the comparatively stodgy ticket-hunting services of Expedia's core e-commerce sites, so separating the two will give investors the option to buy into tried-and-true ticket sales or hot-and-growing recommendations services.
Foolish final thought
I can understand if Expedia's management is getting antsy as its price-to-earnings ratio stays in the affordable midteens while rivals TravelZoo
This is especially true these days, as mighty Google
If you don't want to take my word for it, Stifel Nicolaus' analysis arrives at the same conclusion. Many an analyst note is easily disregarded as market-changing drivel, but it's kind of hard betting against Stifel's track record in general, and in this market in particular.
As always, true Fools need to supplement any investment thesis with their own homework. Expedia gets a rather skimpy approval rating of just 80% in our CAPS community, but the vast majority of the picks were made before the announced spinoff. Did Expedia just change your mind, one way or the other? Jump over to CAPS and make your opinion known right now.
