While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a look at particularly stock-shaking analyst upgrades and downgrades -- just in case their reasoning behind the call makes sense.
What: Shares of Exelon opened Monday down 1% after Goldman Sachs downgraded the electricity provider from "neutral" to "sell".
So what: Along with the downgrade, analyst Michael Lapides lowered his price target to $26 (from $29), representing about 7% worth of downside to Friday's close. While value investors might be attracted to the stock's big slide over the past six months, Lapides believes that the appreciation potential remains limited given Exelon's seemingly unattractive valuation and weak dividend growth prospects.
Now what: Goldman lowered its Exelon 2013 EPS outlook from $2.39 to $2.33, from $2.32 to $2.29 for 2014, and from $2.19 to $2.16 for 2015. "Our downgrade largely reflects our below consensus expectations," noted Goldman. "We also believe that, after this year's dividend reduction, many investors likely expect a return to solid dividend growth -- however, we view this as unlikely due to low power & capacity prices in EXC's core regions (Mid-Atlantic, New York, Midwest), declining competitive retail margins, higher nuclear operating/capital costs and investment requirements at the regulated segments."
With Exelon shares now off about 27% from their 52-week highs and boasting a still-solid dividend yield of 4%, it's hard to believe that those headwinds aren't already baked somewhat into the valuation.
More dynamic dividend plays
Dividend stocks can make you rich. It's as simple as that. While they don't garner the notoriety of high-flying growth stocks, they're also less likely to crash and burn. And over the long term, the compounding effect of the quarterly payouts, as well as their growth, adds up faster than most investors imagine. With this in mind, our analysts sat down to identify the absolute best of the best when it comes to rock-solid dividend stocks, drawing up a list in this free report of nine that fit the bill. To discover the identities of these companies before the rest of the market catches on, you can download this valuable free report by simply clicking here now.
The article Why Exelon Might Keep Pulling Back originally appeared on Fool.com.Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Exelon. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.