Are Price Targets Accurate?
Despite the best efforts of analysts, a price target is a guess with the variance in analyst projections linked to their estimates of future performance. Studies have found that, historically, the overall accuracy rate is around 30% for price targets with 12-18 month horizons. However, price targets do have the ability to sway investor sentiment, especially if they come from credible analysts.
https://www.investopedia.com/terms/p/pricetarget.asp#:~:text=A%20price%20target%20is%20a,the%20stock%20price%20to%20rise.
An analysts target price is less likely to be right over a 12-18 month period and could eventually be right if you stretch out the target date many years into the future. For instance, I could set a target price of $25 for a company that is trading at $5 today and over a 10 year period, it could arrive at that target price. So, is the analyst right or wrong? Or, did they mislead investors in believing that it could achieve that target over a 12 month period? Anyway, I’ve decided to examine the past target prices for Sangoma taken over a year ago and the deviation to the actual share price.
- Posted on Nov 15,2022: Perhaps a client could post the report. GLTA. Sangoma Technologies Target Lowered by Cormark C$25.00 C$20.00 The actual price on Nov 15th, 2023 (12 months later) was $3.42
- Posted on Nov 14th 2022: TD Investment Conclusion. We are lowering our target price to C$16.50 (was C$17.50), based on 1.7x our C2023 revenue estimate. Our target price implies an EV/EBITDA (C2023E) multiple of 9.4x. The actual price on Nov 14th was $ 3.43
- Posted on Sept 28,2022: Sangoma Technologies (CVE:STC) had its price target lowered by analysts at CIBC from C$6.50 to C$6.00.
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- Sangoma Technologies (CVE:STC) had its price target lowered by analysts at Cormark from C$26.00 to C$25.00.
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- Sangoma Technologies (CVE:STC) had its price target lowered by analysts at BMO Capital Markets from C$30.00 to C$20.00.
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- Sangoma Technologies (CVE:STC) had its price target lowered by analysts at Acumen Capital from C$20.00 to C$15.00.
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- Sangoma Technologies (TSE:STC) had its price target lowered by analysts at Acumen Capital to C$15.00.
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- Sangoma Technologies (TSE:STC) had its price target lowered by analysts at Cormark to C$25.00.
- Cibc was the most accurate and the other price targets were just ridiculous. On September 28,2023 Sangoma closed at $4.44 which was still $1.56 lower than its price target. I cringe every time I see those ridiculous price targets between $15 and $25 a share. It might reach those targets one day but in a high interest rate environment and a contraction in the economy, it is unlikely to occur anytime soon.