Why Diebold Might Be Poised to Keep Dropping

While Fools should generally take the opinion of Wall Street with a grain of salt, it's not a bad idea to take a closer look at particularly stock-shaking upgrades and downgrades -- just in case their reasoning behind the call makes sense.

What: Shares of Diebold (NYSE: DBD  ) slipped 2% today after Compass Point downgraded the self-service delivery and security systems specialist from neutral to sell.

So what: Along with the downgrade, analyst Douglas Greiner lowered his price target to $23 (from $25), representing about 25% worth of downside to yesterday's close. While value investors might be attracted to the stock's recent pullback, Greiner believes that several significant headwinds will continue to work against Diebold over the next few quarters.

Now what: Compass expects Diebold to post EPS of $1.30 in 2013, down substantially from prior-year levels above $2.00. "One of the main problems has been lost market share in the regional business where the profitability is approximately twice as attractive as national business," noted Compass. "We expect this trend to somewhat mean revert but not fully recover. ... We expect the core business to continue to face pressure in terms of both top line growth and gross margin." With the stock flirting with its 52-week lows and currently boasting a near-4% dividend yield, however, those short-term concerns might be providing patient Fools with a juicy long-term income opportunity. 

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