Friday's Top Upgrades (and Downgrades)

This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on.

Today, Acme Packet (NAS: APKT) faces a Wall street firing squad, while one analyst finds something pretty in Sally Beauty Holdings (NYS: SBH) .

Read on for all the juicy details.

Acme Packet: A brief stumble or a broken stock?
Two firms took their old "buy" ratings away from communications networking specialist Acme Packet this morning. The stock took a 15% dive in response to these actions and the gloomy earnings pre-announcement that triggered them.

Northland Securities backed up its neutral rating with a $13.00 price target -- a 64% haircut from the $36 target the firm set in March. Wells Fargo slashed its targets by 46%.

Despite the drastically reduced price targets, Wells Fargo still doesn't think that Acme's business model is broken. "While we continue to believe that Acme Packet remains well positioned to capitalize on a number of attractive growth opportunities longer term, we believe near-term visibility remains limited given the challenging carrier and enterprise spending environment," the firm said.

In other words, Wells Fargo doesn't mind incurring trading fees and risking a mistimed bounce here, because the short-term prospects of an obvious long-term winner aren't totally clear. That mindset is more day-trading than investing.

If you believe in all-digital audio and video communications, you pretty much have to see a tremendous bargain in the stock right now. All told, Acme's shares have lost 49% of their value in 2012, while direct rivals Sonus Networks (NAS: SONS) and LM Ericsson (NAS: ERIC) only swooned about 15% each.

Sally Beauty: Ready to make a pretty penny?
The bears are chasing Acme Packet for no particularly good reason, but the bulls are running down beauty products retailer Sally Beauty Supply.

Bank of America just upgraded the stock to a solid "buy" with a $32 price target. The research note sounds downright patriotic, perhaps as a tribute to this week's July 4 celebrations: "[Sally Beauty] is a rare example of a domestic growth story with defensive characteristics," the firm said. More specifically, the business is "recession resistant," and the risks of foreign exchange rate fluctuations is very low.

The bank also highlighted Sally's strong free cash flows and generous share buyback programs, then mused on the possibility of a potential dividend in the future. Fellow Fool Seth Jayson would add that the company's improving cash conversion cycle pours more fuel on the bullish fires.

Acme Packet presents a tempting value play, and Sally looks good on pure fundamentals. Even so, our top analysts have found an even more promising stock to own in the back half of the year -- and you'll be shocked when you see the sector it works in. Read all about this surprising market-beater in a special report, free for a limited time.

At the time thisarticle was published Fool contributorAnders Bylundowns shares of Sonus Networks, but holds no other position in any of the companies mentioned. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+.Motley Fool newsletter serviceshave recommended buying shares of Acme Packet. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.

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