Q: Analysts, are they are all good, they sure can swing a stock price. I remember a couple of years ago when one of them downgraded a Berkshire owned stock, and Mr. Buffet said the earnings were just fine and the analyst got it wrong. Why do they always have to be right?
Thanks Again
Thanks Again
5i Research Answer:
Analysts are typically 'followers'. If a stock moves up they raise their target price, and vice versa. Also, they tend to follow the mean. Few analysts are willing to go against the crowd. This is essentially job security. If the average target on a stock is $200, then an analyst at $350 stands out. If they are wrong they look bad. So even if that analyst really likes the stock, he/she might put a target of only $225. It is still higher than average, and if they are wrong they won't look so bad. But generally, other than in the short term analysts do not really influence stock prices that much.