Ask a Fool: What Does It Mean When a Stock Is Downgraded?
Analyst opinions can certainly move stocks -- sometimes by a lot. For example, an analyst recently downgraded Square, and the stock plunged by 16% as a result.
However, my advice is to take an analyst downgrade with a grain of salt. It's important to keep in mind that a downgrade is simply a change in a particular analyst's opinion about a stock. For example, the Square downgrade was because an analyst felt that the company's experimentation with bitcoin won't have the positive effect the stock market seems to be expecting. In addition, the financial institution that employs the analyst generally releases the report to its own clients, and many may choose to sell, creating downward pressure on the stock.
In fact, analyst downgrades can create buying opportunities in solid companies on which you've done your own research and feel that there is strong long-term potential.
Source: Fool.com
