What good are analysts who are consistently wrong? For instance, take Arena Pharmaceuticals (ARNA) after FDA Panel Votes Against Arena's Diet Drug Lorcaserin. How much money did their clients lose? Not all analysts work for brokerage houses, but many do, and their pay is not determined by the accuracy of their calls but the increase in sales.

How do they explain their backpedaling? One day they are pushing the stock and the next they are running for cover. Clearly they have to change their opinions based on new information, but perhaps there was too much wild speculation to begin with. More likely, they made too many false assumptions, which they love to do in a crowd so as not to be the lone incompetent.

I was scanning through stocks that made substantial pre-market moves to bring to your attention and I found just that in Micron Technology (MU).

The tech firm was more than 3% lower before the bell thanks to a downgrade from Goldman Sachs. The brokerage cut MU to neutral from buy. Goldman noted that it "underestimated the impact tablets would have on the PC supply chain, with tablets cannibalizing notebooks faster and to a greater degree than we [the brokerage] had expected." Goldman Sachs also stated that MU was negatively impacted by Inotera's delay of its 50mm transition.

Analyst Upgrades

• Standpoint Research upgraded Bank of America (BAC) to accumulate from hold based on valuation.
• UBS upgraded First Solar (FSLR) to buy from neutral and raised its price target to $150 from $136. The firm believes global solar demand will be higher than expected in 2010 and 2011.
• Goldman upgraded Lowe's (LOW) to buy from neutral and has a $24 target on the stock. The firm upgraded shares given the company's margin recovery which will drive EPS growth in 2H10.
• Zep Inc. (ZEP) was upgraded to buy from neutral at Janney Montgomery.
• Rosetta Resources (ROSE) was upgraded to buy from neutral at SunTrust.
• Matrixx Initiatives (MTXX) was upgraded to buy from hold at Roth Capital.

After calls from a U.S. congressman for BP (BP) executives to commit hara-kiri and following President Obama's successful pressure on the company to set up a $20 billion escrow account, cancel $7.8 billion in dividend and sell $10 billion assets, a few analysts decided it couldn't get any worse and upgraded the oil giant shares to buy.

It's been nearly two months since BP's Deepwater Horizon rig exploded in the Gulf of Mexico, causing a massive oil spill -- that's still hasn't been resolved -- and the worst environmental disaster in U.S. history. Shares of the company were nearly halved as the cleanup cost estimates have swelled.

And as the agreements with Obama lifted some of the uncertainty, triggering a relief rally, some analysts also opted to upgrade BP shares.

Earlier this morning, Credit Suisse issued an upgrade for pharmaceutical firm Merck (MRK), upping the company to outperform from neutral. The brokerage noted that MRK's long-term view is positive thanks to "new interest to come from the pipeline."

Credit Suisse also gave other reasons for the move, including synergies, stronger-than-expected earnings, and potential valuation growth. The upgrade was accompanied by a target price elevation to $47 from $35. In pre-market action, MRK was higher thanks to the news.

Late Thursday, McDonald's (NYSE: MCD) announced a 10% increase to its cash dividend. The fast-food firm will now shell out 55 cents per share each quarter, bringing its total quarterly dividend payout to roughly $600 million. The increase will cost McDonald's about $220 million per year. This most recent dividend hike continues a long-term trend for Mickey D's, which has raised its quarterly payout every year since 1976.

In other MCD news, Bernstein initiated coverage of the stock with an "outperform" rating. The brokerage firm likes McDonald's because of its broad global footprint, with Bernstein noting that restaurants more heavily dependent on the sluggish U.S. market could struggle.

Brokerage firm Barclays this morning raised its price target on Apple Inc. (NASDAQ: AAPL) from $188 to $208. The new target represents a premium of 25.8% to AAPL's closing price on Wednesday. Additionally, Barclays reiterated its upbeat Overweight rating on the shares.

In a note to clients, analyst Ben Reitzes cited Apple's solid product pipeline and strong free cash flow outlook. "New products should begin to flow again within a few weeks," said Reitzes. "We are more upbeat about the long-term prospects for the iPhone & Mac lines with potential new products."

Analyst upgrades:

• Citigroup upgraded American Express (NYSE: AXP) to Buy from Hold and added the stock to its Top Picks Live list following the company's investor day. Citi believes American Express' credit trends are improving and raised its price target on shares to $36 from $28.
• Janney Montgomery upgraded Gardner Denver (NYSE: GDI) to Buy from Neutral after meeting with management to reflect expectations for EPS growth in 2010 and valuation. The firm has a $38 target on the stock.
• BofA/Merrill upgraded Freeport McMoRan (NYSE: FCX) to Buy from Underperform and raised its target to $87 from $49 based on strong copper fundamentals.
• Cbeyond (NASDAQ: CBEY) was upgraded to Overweight from Equal Weight at Stephens.
• Gibraltar Industries (NASDAQ: ROCK) was upgraded to Outperform from Neutral at Baird.
• Fortress (NYSE: FIG) was upgraded to Outperform from Market Perform at Keefe Bruyette.

Moody's cut Sony Corp.'s (NYSE: SNE) long-term ratings from A2 to A3 today. Slowing growth, price declines, and a strong yen were given as the reasons.

The company expects a second consecutive year of losses and is getting ready to kick off a restructuring plan. Nonetheless, the credit rating agency doesn't expect the Japanese electronics firm to overcome the effects of the global financial crisis -- especially for high-end, high-margin products.

US securities analysts have been encouraged not to rate every company they cover as a Buy. That may not be working even as earnings fall.

According to the FT, "Equity research departments around the world have become much more bearish since the start of the year, but US analysts remain markedly more bullish on stocks than peers elsewhere." Research quoted by the paper shows that only 6.7% of stocks covered by U.S. stock researchers rate a Sell.

The news is disturbing because positive ratings are one of the things that keep investors in stocks and analysts who are slow to cut their price targets and modify opinions are likely to cost shareholder money.

U.S. stock researchers have long believed that lowering ratings gives them less access to management. That is a poor excuse for being overly bullish on shares.

The investing public and press mock analysts who put Sell ratings on stocks after they have dropped 90%. It appears that those actions are built into the U.S. equity research system.

Douglas A. McIntyre is an editor at 24/7 Wall St.

The shares of Level 3 Communications (NASDAQ: LVLT) are sinking deeper into penny-stock territory this morning following a damaging price-target cut from analysts at Citigroup. The brokerage firm slashed its price target on LVLT from $2.00 to 50 cents, and reiterated its Sell rating on the stock.

After closing Monday at 94 cents, LVLT is slipping ever closer this morning to that hypothetical "support at zero." In fact, following yesterday's all-out bearish note on General Motors (NYSE: GM), one has to wonder if Deutsche Bank will soon be slapping another of its famous goose-egg targets on Level 3. The stock has closed seven out of the past 13 sessions south of the $1 level, and its descending 10-day and 20-day moving averages have provided stubborn resistance in recent months.

In fact, while many analysts have already denounced LVLT, there's still room for potential downgrades or price-target cuts. Zacks reports two Buy or better ratings from brokerage firms, and these bulls may soon be shamed into lowering their opinions (if so, they would join six analysts who consider the stock a Hold, and six who deem it a Sell or Strong Sell).

Meanwhile, Thomson Financial pegs the average 12-month price target at $1.68, a premium of 87% to the equity's closing price on Monday. While more negative notes could drag the shares lower, there is a bright side -- from their current level, the shares could only lose about 85 cents.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Fertilizer firm Potash Corp. of Saskatchewan (NYSE: POT) was hit with a price-target cut from analysts at UBS today. The brokerage firm slashed its target price from $150 to $130, but reiterated its Buy rating on the stock. It's been a schizophrenic day for the company, brokerage-wise; the late-breaking note from UBS effectively dashed the upward momentum POT gained this morning when Dundee upgraded the North American fertilizer sector to Overweight.

In fact, "schizophrenic" more or less sums up analyst activity on POT during the past several weeks. Following its third-quarter earnings report on October 23, Potash Corp. received no fewer than five price-target cuts, along with three reiterations of bullish Buy or better ratings, plus an upgrade. To make matters even more interesting, this is the second price-target cut UBS has issued on POT in the past week -- the first cut, on October 29, was from $165 to $150.

According to Thomson Financial, the deluge of downward revisions might not be over yet. POT's average 12-month price target is $115.98. This consensus estimate represents a rather healthy premium of 36% to the stock's closing price last Friday. Considering that POT shares have plummeted about 41% year-to-date, it seems safe to say that expectations might be too high for this Canadian import.

On October 3, the shares of Apple Inc. (NASDAQ: AAPL) dropped below the $100 mark for the first time since May 2007. In fact, the stock dropped last Friday to a new 52-week low of $85, representing a 19-month nadir for the iPhone parent. Today, this price plunge served as the catalyst for a valuation-based upgrade from Bernstein.

In a note to clients, Bernstein boosted its rating on AAPL from Market Perform to Outperform, and said that its "longer-term growth story remains intact." Analyst A.M. Sacconaghi added, "Investors appear to be valuing Apple on an earnings multiple, rather than on cash flow, which fundamentally undervalues the company given the huge deferred revenue growth associated with the iPhone."

Specifically, the brokerage firm estimates that the iPhone itself could add between $2.25 and $3.40 per share to cash flow above earnings in fiscal 2009.

However, following the stock's recent free-fall down the charts, Bernstein was forced to trim its price target on AAPL from $175 to $135. Credit Suisse followed suit, slashing its price target on the equity from $200 to $135. Despite today's gain of about 7% amid a massive rally in U.S. stocks, Apple shares could be vulnerable to more price-target cuts during the near term. Thomson Financial pegs the average 12-month price target at $176.33, a lofty premium of 82% to Friday's close at $96.80.

Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.

Forget finance -- it's a rough day to be a handset maker. Following a widely panned earnings report from Research In Motion Limited (NASDAQ: RIMM), Finnish firm Nokia Corp. (NYSE: NOK) was slapped with price-target cuts from JP Morgan and ING. What's more, Dresdner Kleinwort warned that RIM's weak gross-margin guidance will most likely be echoed by Nokia.

Digging into the various reports, JP Morgan and ING both slashed their price target on Nokia from 11 euros to 10 euros per share. JP Morgan reiterated its "underweight" rating, and said it still thinks Nokia can increase its market share -- just not as much as the company might have hoped. The brokerage firm also sees replacement cycles growing by 6.5 months in 2009.

Meanwhile, Dresdner Kleinwort backed its 'hold" rating and its 15-euro target price, but warned that gross margins across the sector will remain under pressure through 2010.

The barrage of bearish brokerage notes -- along with RIM's disappointing turn in the earnings spotlight -- has NOK more than 4% lower at midday. Today's plunge likely came as a disappointment to enthusiastic option players; yesterday, traders on the International Securities Exchange (ISE) and the Chicago Board Options Exchange (CBOE) bought to open 25,322 calls on NOK, compared to just 346 puts.

The shares of Wachovia Corporation (NYSE: WB) opened on a gain of nearly 6% this morning, thanks to a positive note from brokerage firm UBS. The analysts raised their price target on WB from $12.50 to $16, and reiterated a "neutral" rating. However, the stock has wasted no time in whittling its early morning gains, and slipped into negative territory before midday.

Yesterday, Wachovia shares closed lower after Friedman Billings & Ramsey reinitiated coverage at "underperform." No surprise there -- but, in today's session, the equity is declining on what should have been a bullish boost from UBS. In fact, most financial stocks are higher today following speculation on a potential buyout bid for Lehman Brothers (NYSE: LEH). The Select Sector SPDR Financial Fund (NYSE: XLF) is sitting on a gain of more than 2% at last check.