World Clock

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.

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