It is difficult to get a man to understand something, when his salary depends on his not understanding it.
-- Upton Sinclair
When Apple announced its second-quarter earnings on
April 23, a flurry of news reports cited Wall Street analyst forecasts
to help explain the company's results. This is how the bottom lines of
companies and stocks are ordinarily explained to the public.
An analyst from Goldman Sachs (NYSE: GS )
noted that the March quarter was better than expected, but the June
quarter guidance was "far worse than feared." He ultimately lowered his
price target to $500 from $575, while maintaining a "buy" recommendation
on the stock.
An analyst from JPMorgan (NYSE: JPM )
also lowered his target price, in this case to $480 from $575, and
advised he expected "AAPL to remain range-bound" until there was more
visibility into new product launches. More bullishly, the analyst from Piper Jaffray felt Apple might trade higher in late 2013, and maintained his $688 price target and "overweight" rating.
Analyst opinions such as these routinely drive coverage of the stock market. But a new study, "Inside the 'Black Box' of Sell-Side Financial Analysts,"
by professors Lawrence Brown (Temple University), Andrew Call (Arizona
State University), Michael Clement (University of Texas), and Nathan
Sharp (Texas A&M), suggests that ordinary investors should look
elsewhere for insights into their favorite companies. (more)
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