research Market Intelligence /marketintelligence/en/news-insights/research/bridges-for-sale-finding-value-in-sell-side-estimates-recommendations-and-target-prices content
BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
PRIVACY & COOKIE NOTICE
Log in to other products

Login to Market Intelligence Platform

 /


Looking for more?

Contact Us

Request a Demo

You're one step closer to unlocking our suite of comprehensive and robust tools.

Fill out the form so we can connect you to the right person.

  • First Name*
  • Last Name*
  • Business Email *
  • Phone *
  • Company Name *
  • City *

* Required

In This List

Bridges for Sale: Finding Value in Sell-Side Estimates, Recommendations, and Target Prices

State Of Singapore Online Video Subscription

Power Forecast Briefing: Capacity Shortfalls to Test the Renewable Energy Transition

Episode 43 - More Change, M&A On Horizon For Equity Research Industry

Cable Nets Struggle With Little Revenue Growth Expanding Programming Budgets

Quantamental Research
Bridges for Sale: Finding Value in Sell-Side Estimates, Recommendations, and Target Prices

Highlights

Investors should focus on shifts in consensus recommendations, as the recommendation level by itself often reflects pro-management and high-growth biases.

Analyst estimate dispersion acts as an indicator of corporate quality – high quality companies have more stable revenue and income streams that are more amenable to forecasting.

In May 2002, the SEC approved NYSE and NASD rules designed to mitigate research analyst conflicts of interest. Among other things, the rules prohibit analyst participation in investment banking (IB) sales activities and bar them from reporting to IB departments. While not eliminating conflicts, the rules and accompanying enforcement actions have had a big effect on how research departments operate.

This report looks at the informativeness of analyst recommendation revisions, target price revisions, and estimate dispersion, primarily within the post-2002 regulatory environment, and finds significant results in all three areas.

Findings include:

  • Investors should focus on shifts in consensus recommendations versus their levels, which tend to be biased. A strategy based on the 3-month change in analyst buys vs. sells generates statistically significant results across all geographic regions.
  • Target price revisions likewise provide insight into changing analyst attitudes. The 6-month change in target price gap, or spread between target and market price, produces significant results across market cap ranges in the U.S and in international markets.
  • Analyst estimate dispersion acts as an indicator of corporate quality, as high quality companies are more amenable to forecasting. One-month revenue estimate dispersion is effective as a small cap strategy in the U.S. as well as across the indices for Europe and developed Asia.
Download the Full Report Now
Click Here

Value And Momentum: Everywhere, But Not All the Time

Read Now
Use global estimates and analytical tools to make the most informed decisions.
Learn More

Natural Language Processing – Part II: Stock Selection

Read Now