Wednesday, April 4, 2012

The Lovely World of S&P Analyst Price Targets

If you want a good chuckle you can always turn to a S&P stock report. Take for example their recent research report on Netflix. Right there at the top of the report they blessed the stock with a "Buy" rating and slapped a 12-month price target of $135 on it. Who can complain with a 17% gain? Looks like it's time to buy!

Oh wait, what is this on page 3?

Gotta love it! So on the one hand their analyst is saying 'Buy" because with a price target of $135 it is 17% undervalued. Then your later being told that, by the way, our "proprietary quantitative model" says you should lose about 42% listening to that Analyst.

This isn't some one-off thing, in fact, it is amazingly common. How about Boeing? Looks like another buy! Price Target $86. Not a bad 16% gain.
Oh wait......

Sorry, S&P actually says you should lose 27%.

So how about something your not being told to buy? Chipotle...
Don't worry, your not the only person wondering why something has a "Hold" rating when it's price target is 11% lower. However, to the analysts credit the "hold" rating was put on when it was trading at $378 (but don't give too much credit -- why is he recommending to hold something he thinks should go down in price?)

Worse yet, not only does the analyst think it's overvalued but so does S&P's "fair value calculation". By 30% in fact. Yet still no "Sell" rating?
I think you get my point......These "Price Target's" are pure humor. And as you may have guessed, the corresponding star ratings provide nothing useful in performance -- and actually have detracted as you can see in the below performance of their "All Stars" basket of stocks vs the regular S&P 500.


You gotta love these "useful" price targets!

1 comment:

  1. Yep! I Really Love These Targets. Very Useful Indeed ! Gives me confidence.

    ReplyDelete