Stock Price Targeting 101
It seems that analysts have a universal problem with price targeting a stock beyond the 52-week high.
If you are going to price target your 52-week target price below the stock's 52-week high, then you should nonetheless explain how the fundamentals of a stock which may have changed to the downside won't within a year's time span not suddenly snap back.
And that is where I take issue after issue with pretty much every stock analyst. Sure, some have excellent track records with stocks that are within that analyst's specialty. Some just know how to value Automotive Parts Suppliers.... Some know beverage companies..... Some are good with Technology Stocks like Apple Computers or Entertainment Industry Stocks like Netflix.
But, even these anylsts discussing their specialty do not explain why they would undercut a stock's price below what the stock has already sold for this year.... That is insane.
Take a look at Deutche Bank's analysis of Dr. Pepper Snapple Group today, which is my retirement stock in which I own 526 shares of right now, (DPS):
The Analyst raises DPS from Hold to a Buy while keeping a $39 price target... Despite the fact that the stock has already surpassed that to $40.24 a share earlier this year.
So.... The stock is a buy inspite of the Analyst expecting that next year we will not see DPS trade beyond its 52-week high? This is the case inspite of expecting $100 million worth of Stock Buyback + 2 - 3% Dividend Yield attached to the stock.
How???? Why is this so?
The Stock is just trading a measly 4 pts below a target that is a 52-week target.... Not a 12 day target.... But a FULL YEAR target.
And we can expect the stock to do no better than 4 points? And you do not explain to your readers why you think the Valuation on DPS will not change from where you value it today (which frankly is not how you would value DPS if this was Last Year)?????
Analysts need to get a clue here....
Readers deserve better analysis from these professionals. I'd be better off hiring a High School Kid to spend a week going through Dr. Pepper Snapple Group information and then giving me his/her opinion on the stock than this crap.
How in the heck can anyone expect the Valuation of DPS to reflect 2nd half of 2010 instead of first half of 2010 next year?