Friday, 4 March 2011
Beware Analyst Upgrades & Downgrades - The Case of Sell-Side Analysts
Bob Olstein explains the pitfalls of following sell side research.
He uses the example of Intel, which missed earnings expectations a quarter ago by a nickel. Consequently analysts lowered their price target for the company to $20 from $28, that represents a $45bn cut in the valuation of Intel just because they missed expectations by a nickel. A slight over-exaggeration one would think.
He also highlights 'free cash flow' as an essential metric for judging the overall valuation of a company.