RE:CIBC raises target to $60 Obscure1 wrote: Suncor Energy (TSE:SU – Get Rating) (NYSE:SU) had its price objective boosted by CIBC from C$50.00 to C$60.00 in a report published on Thursday morning,
BayStreet.CA reports.
Obscure - surprised you would post something like this given that you worked in the business at one point in your life.
It is a well known fact that price targets by Brokerage Houses are notoriously inaccuate. Many empirical studies over the years have shown that these forecasts are wrong about 70% of the time. One study I saw years ago by some university professors who looked at this issue using data for decades found that a monkey throwing darts was about as accurate as the brokerage firms.
These price forecasts are aimed to generate trading business for the firm and have more to do about marketing and sales than empirical research. No matter how sophisitcated the model, the results still boil down to the assumptions that go into it and how good they are. Another word for assumptions is "guesses".
I can recall when I was still working in the industry that MRK announced problems regarding VIOXX and the SP tanked. My firm's research department immediately issued a sell recommendation. I looked the situation, using my experience figured it was a good time to buy and I started buying for me and my clients. Got into deep sheet with the firm (the firm saying they would not protect me if I got sued if the investment in MRK went south).
End result?
A year later I sold out all the positions for a 40% profit and had many happy clients.
So much for research departments!!!