This Just In: More Upgrades and Downgrades

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, we've got some pretty sharp stock pickers down here on Main Street, too. (And we're not always impressed with how Wall Street does its job.)

Given this, 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.

Today, Wall Street is talking down semiconductor stocks like Intel (NAS: INTC) , Marvell (NAS: MRVL) , and AMD (NYS: AMD) . Also getting short shrift is UPS (NYS: UPS) . In happier news, one analyst sees hope for an incline at Cliffs Natural Resources (NYS: CLF) . Let's find out why.

When the chips are down
"The intermediate term prospects of PC's do not look optimistic." So said Citigroup this morning, and acting on the suspicion, the megabanker took a swipe at all things PC-related today, beginning with semiconductor chip stocks. Intel, AMD, and Marvell all got hit with downgrades to neutral.

According to Citi, the continued strength of tablet computer and smartphone sales will take a toll on traditional personal computer sales, with shipments in the category falling 1% in the current quarter. And without growth to support their valuations, Citi sees "limited likelihood" of any "meaningful" improvement in stock price in the near future. But what about the longer-term?

With AMD and Marvell both selling for less than 10 times forward earnings estimates (and Intel costing only a little bit more), all three stocks seem attractively priced relative to consensus estimates of near-16% long-term earnings growth in this industry. Investors willing to wait out the downturn in hopes of a rebound later on, though, may want to favor Intel over the others. The company's 3.9% dividend yield pays you the most for your patience -- a whopping 70% premium to the payout at Marvell, and you only have to pay about one more point of P/E to capture the higher dividend.

AMD, in the meantime, with no dividend, and no profits to support one, can only be termed "worst-of-breed."

More downs than UPS
PCs aren't the only industry that has Wall Street worried today. This morning, British banker Barclays knocked the global transport firm down to an equalweight rating, slicing $6 off the stock's target price (now $80) in the process. Here, though, analysts may be making a mistake.

Admittedly, UPS doesn't look obviously cheap. To the contrary, the stock's 18.5 price-to-earnings ratio could almost be called expensive. But consider: UPS is currently generating a lot more cash than its P/E suggests. Indeed, with $5.6 billion in positive free cash flow generated this past year, the company's about 40% more "cash profitable" than its income statement lets on.

With a price-to-free-cash-flow ratio of only 12.6, an 11.1% growth rate, and a 3.1% dividend yield, UPS is a whole lot cheaper than it looks.

Cliffs climbing
And speaking of investors getting fooled by misleading P/E scores... this morning analysts at Nomura Securities called a bottom on the much-maligned shares of Cliffs Natural Resources. Arguing that China's stimulus package will put an end to "destocking" of steel in the country, Nomura says "iron ore prices have reached a short-term inflection point" and Cliffs' stock is now back "on track" to outperform.

With shares trading for barely four times trailing earnings, Nomura seems to be making an easy call here -- but is it the right one?

Remember, so far this year Cliffs has booked a $33 million operating cash outflow, made worse by a doubling in capital expenditures. Unless Nomura's promised "inflection" occurs, and soon, the company's on track to burn through $1.1 billion in negative free cash flow this year -- which seems problematic for a firm that's loaded down with $4.3 billion in debt already, and with less than $160 million in cash.

Regardless, Nomura says it's "fully" confident that Cliffs can maintain its current 6% dividend payment "under most iron ore scenarios over the next two years." Investors shouldn't be so sanguine. After all, it isn't Nomura's money at risk if Cliffs winds up unable to pay. It's yours.

Of course, when it comes to dominanting markets, there's no question that Intel still holds top place in the PC microprocessor arena. That market is maturing, though, and Intel will find itself in a precarious situation for the longer term if it doesn't locate new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors need to know when it comes to the chip giant. Furthermore, you'll continue to receive updates as news develops for an entire year. Click here now to learn more.

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Fool contributor Rich Smith does not own (or short) shares of any company named above. You can find him on CAPS, publicly pontificating under the handle TMFDitty, where he's currently ranked No. 291 out of more than 180,000 members. The Fool has a disclosure policy.The Motley Fool owns shares of Intel. Motley Fool newsletter services have recommended buying shares of Intel. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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