In a Feb 2 report, previewing OTEX' upcoming quarterly report, TD reduced their price target from US$40 to US$28 (and I quote) due to lower peer valuations. Is the madness of crowds influencing the analyst?
And yet TD's earnings forecast is US$4.17 in 2026 and US$4.84 in 2027, representing a P/E ratio of 5.5 and 4.75 respectively on a US$23 share price, which is around where it traded today. Even on its old US$40 price target, the 2027 multiple is only 8.3 times forecast earnings Does TD not believe its own earnings forecast? If you are sticking with your earnings forecast, then why not stick to a reasonable price target?
Analysts tend to both follow other analysts and follow prices. When a stock declines, invariably so will the target price. Both moves tend to come from the fact that being an analyst is a cushy, well-paid job, and there is no upside in sticking your neck out. If other analysts are all at $50, say, then you can be the highest at $55. You don't need to be a hero and have an $80 target when consensus is $50. The same is true of earnings. Even if an analyst believes a company will make $5.00 per share, if every other analyst is at $3.00 then the bullish analyst will probably only forecast $4.00. He/she will still be 'right' if the company performs, but if the company screws up and he/she is at $5.00 they will look much worse and lose credibility.