RE:RE:RE:Analysts should analyse without guessing share price Right now, reasonable valuation figures (Target Prices) vary from $62 (CIBC) to $102 (TD). Big difference, eh? What do you think? I have seen them referred to as upside potential. Keep in mind that if something has an upside potential it also has a downside potential.
Look at the following study:
In their March 2005 paper entitled “Do Sell-Side Analysts Exhibit Differential Target Price Forecasting Ability?”, Mark Bradshaw and Lawrence Brown test the accuracy of 12-month stock price targets both for individual analysts and for analysts overall. Using a filtered sample of about 100,000 individual 12-month stock price targets from Thomson Financial over the period 1997-2002, the authors conclude that: - Stock prices are at or above analyst targets at the end of 12-month prediction periods only 26% of the time. Stock prices reach analyst targets sometime during 12-month prediction periods only 35% of the time.
35% is very poor performance.
It is better for ordinary investors to think of them as guesses, that to think of them as promises. IMO.
All the best
Snowey