So, hear me out. If they are right , there won’t be surprises, as more than not, earnings announcements after market, stock does one of the 3 things. Up 25%, down 25%, moves sideways. Ok, so why are the analyst’s estimates are “almost” wrong? Because exactly these 3 things happen. Walk street calls this “surprise” or “met expectations“ lol. Surprise!
Then, what happens next, analysts usually lower or increase or maintain their prices target…depending on…how the market already moved. No surprise there.
So is there value for these analysts price targets? So for simplicity, let’s say all analysts are in unison. Case 1: estimates is 25% higher than current stock price. The market is dead wrong, and after earning release, stonk up. Case 2: opposite of case 1. Case 3: met estimates. Stock flat!
Stock flat, almost always not the case, Wall street loves surprises, that’s the way, they the biz. So, those estimates are almost always useless…they are just like your favorite YouTube channel, there is always some willing viewers.
P.S. I wish they are right more than 60% of the time ;)