Target Price - revisit

Just read an article about how accurate (x-month) target prices determined by analysts are. The article says the percentage of accuracy is pretty low. Well I'm not sure how the experiment or survey was done, but I guess the analysis of the conclusion is a bit incomplete, and I want to comment in here.

The article only talked about the percentage of accuracy, but did not give an explanation of the reason behind the inaccurate price prediction, probably the survey did not contain that kind of information. I'm sure many on-the-job analysts who have read this article may feel bitter about the conclusion.

To my guess, there was problem in the survey. It is like telling me who ever has a low score in the classroom is a stupid student, but ignored the reason why he scored low. The survey neither tells me something very important nor solving the problem.

The world and economy are dynamic. Things change every minute (if not second). Target price prediction can only be so good as of the day the analyst conducted the analysis. Situations and conditions may already have changed after he made the prediction. If so, not allowing the analyst to revise his prediction from time to time as condition changes and claim he is wrong after certain time has passed is simply not a fair measure.

On the other hand, I guess no single analyst bothers to post his/her updated price target everyday (unless you are his/her precious client). I guess even if they do I don't bother to check everyday.

So, how should we measure the accuracy of their price (and as well, corporate earnings) predictions? Tough question. As an investor (not the analysts' employers), I care less about their accuracies. As I said in the last blog, it is how the investors who hold the majority of money react to the price target announcement that is more important. After all, it is "YOU MAKE MONEY" that is most important to you.

Price/earnings target predictions represent only a little piece of the conclusion, I guess people are paying too much attention to the one single number from the analysis. There should be many information and analysis you could probably get from the research reports, why focus only on one single number???