01 February 2006

Squirm, baby, squirm

One of the reasons I love listening to Bloomberg Radio on XM is that I love to hear analysts squirm. Some of the hosts are particularly good at putting the screws to analysts that do ridiculous things. This morning they had on a UBS analyst that cut his price target on Google this morning after the earnings they reported didn’t meet analyst expectations.

That’s not all that unusual. Feeding new data into models will make price targets fluctuate over time. Usually the fluctuations are hardly noticed. This analyst, however, has to take the cake for the ultimate momentum analyst.

He cut his price target on Google from $500/share to $225/share. Yup, more than half based on one quarter of earnings. Listening to him try and justify both his initial price target and the cut after the price dropped 10% overnight was hilarious. “It’s impossible to predict in such a growing market” was the usual refrain.

He claims his price targets and subsequent revision due to fundamentals and not due to the market reaction. Right, and I’m the Queen of England. This is why I advise people to stay away from individual stocks and stick with mutual funds and ETFs. These paid analysts (the “experts”) are so full of it they are ready to blow. And they’re the ones we’re supposed to listen to?

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