Yesterday, I wrote about short-sellers and their excessively pessimistic target prices that are almost useless in figuring out what the share price will really do.
On a related topic: Matt Levine (Money Stuff) argues that sell-side analysts‘ real job is to provide their clients (institutional investors) with access to company management. In other words: institutional clients rate analysts on the basis of company introductions, not on the basis of the accuracy of their recommendations (the institutions have their own analysts). Meanwhile, CEOs and CFOs favour analysts who give their stock a „buy“ rating and/or an earnings forecast that is easy to beat. This explains why sell-side analysis usually errs on the positive side.
On a related topic: Matt Levine (Money Stuff) argues that sell-side analysts‘ real job is to provide their clients (institutional investors) with access to company management. In other words: institutional clients rate analysts on the basis of company introductions, not on the basis of the accuracy of their recommendations (the institutions have their own analysts). Meanwhile, CEOs and CFOs favour analysts who give their stock a „buy“ rating and/or an earnings forecast that is easy to beat. This explains why sell-side analysis usually errs on the positive side.
Working on the sell side for the last two years, that is my impression as well.