Downgrade

AAA

DEFINITION of 'Downgrade'

A negative change in the rating of a security. This situation occurs when analysts feel that the
future prospects for the security have weakened from the orginal recommendation, usually due to a material and fundamental change in the company's operations, future outlook or industry.

INVESTOPEDIA EXPLAINS 'Downgrade'

Analysts place recommendations on securities to give their clients or investors a general idea on the expected performance of that security looking forward. These recommendations are adjusted when the basis behind the recommendation changes, such as the price of the stock or newly released data in the company's financial statements.

An analyst may downgrade a stock from a buy to a sell, after the company released information about an Securities and Exchange Commission investigation into the company's operations.

RELATED TERMS
  1. Pundit

    A person that publicly expresses their opinions or comments on ...
  2. Hold

    An analyst's recommendation to neither buy nor sell a security. ...
  3. Underperform

    An analyst recommendation that means a stock is expected to do ...
  4. Outperform

    An analyst recommendation meaning a stock is expected to do slightly ...
  5. Upgrade

    A positive change in the rating of a security. An upgrade is ...
  6. Buy

    1. A recommendation to purchase a specific security. A buy rating ...
Related Articles
  1. Investing Basics

    Analyst Recommendations: Do Sell Ratings Exist?

    Analyst reports can be an investor's best friend - but without knowing how to read them, you won't be able to fully utilize them.
  2. Investing Basics

    Why There Are Few Sell Ratings On Wall Street

    We outline reasons that may show why enforcing more sell ratings isn't guaranteed to increase Wall Street's objectivity.
  3. Personal Finance

    The Debt Ratings Debate

    Lack of competition and potential conflicts of interest have called the value of these ratings into question.
  4. Bonds & Fixed Income

    Why Bad Bonds Get Good Ratings

    Credit ratings are not the only tool to rely on when assessing bonds. Find out why they sometimes fall short.
  5. Options & Futures

    January Effect Revives Battered Stocks

    Make sure you buy in low to ride this phenomenon for all it's worth.
  6. Active Trading

    The Ups And Downs Of Biotechnology

    This volatile sector can provide huges gains, but there's also lots of downside.
  7. Credit & Loans

    Understanding Credit Risk

    Credit risk arises whenever a borrower is expecting to use future cash flows to pay a current debt.
  8. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  9. Economics

    Venezuela Teeters On Edge As Oil Revenues Shrink

    Low oil prices have drastically revised the economic status quo -- dealing a destabilizing blow to oil-exporters like Venezuela due to falling oil revenue.
  10. Credit & Loans

    5 Things You Need For A Good Credit Score

    How good a credit score you have depends on 5 factors. What they are and what it takes to better your credit rating if it's not as high as you'd like.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center