UBS' Darden Downgrade: Deceptive, Confusing and Poor

Yesterday UBS analyst David Palmer downgraded Darden Restaurants (DRI) to “Neutral” from “Buy”. In order to rationalize that downgrade the analyst moved their price target down $1 from $39 to $38. Yet DRI remains his top pick in the casual dining segment.

The stock moved from $34.97 to $33.01 on the “downgrade”. If the analyst expects the stock to move to $39, or nearly 9% from the closing price before the rating change, why change the rating at all?

To me, an anticipated 9% move to a price target is a rather bullish sign and a signal to buy - and not just hold - a stock. This is another example of deceptive, confusing and poor research ratings. I don't necessarily put blame on the individual analyst in this case but this is an indictment of the entire research system.

Disclosure: Long

Comments

[Francis Fil...:]

Earth to Prof. Rothbert: Why the sudden bout of whining over sell-side research? If you had done even a cursory amount of basic homework, you would discover that analyst ratings occur within a broader context of portfolio weightings. Frankly, MCD is not that compelling a name when compared to other stocks that merit a greater weighting. I suggest you spend less time sniveling, and more time working to form well informed opinions.

2008 Aug 28 10:03 PM

[supershort:]

This stoock won't see 39 anytime this year. More like 29.

2008 Sep 16 08:25 PM