Does Petrobras (PBR) Have the Potential to Rally 45% as Wall Street Analysts Expect?
Shares of Petrobras (PBR) have gained 1% over the past four weeks to close the last trading session at $11.66, but there could still be a solid upside left in the stock if short-term price targets of Wall Street analysts are any indication. Going by the price targets, the mean estimate of $16.88 indicates a potential upside of 44.8%.
The mean estimate comprises four short-term price targets with a standard deviation of $2.17. While the lowest estimate of $15 indicates a 28.6% increase from the current price level, the most optimistic analyst expects the stock to surge 71.5% to reach $20. It's very important to note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.
While the consensus price target is highly sought after by investors, the ability and unbiasedness of analysts in setting price targets have long been questionable. And investors making investment decisions solely based on this tool would arguably do themselves a disservice.
But, for PBR, an impressive average price target is not the only indicator of a potential upside. Strong agreement among analysts about the company's ability to report better earnings than they predicted earlier strengthens this view. While a positive trend in earnings estimate revisions doesn't gauge how much a stock could gain, it has proven to be powerful in predicting an upside.
Here's What You Should Know About Analysts' Price Targets
According to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.
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