Analysts gain lots of attention when they set target prices that are well-beyond a company’s closing price. Bloomberg published a list of companies with the highest gap between the average target and the trading price.
Investors should not expect consensus calls to be correct, but companies below their target prices are a good way to look for trading opportunities. Still, analysts could downgrade a company to be in line with more reasonable expectations.
Business Section: Investing Ideas
In recent weeks, weak earnings from Intel (INTC), Microsoft (MSFT), Google (GOOG), and AMD (AMD) confirm the PC sector is at a cyclical trough. Investors who bid up shares for these companies will have to look for the economy to improve. Windows 8, touted as the system to boost PC sales, will take time to play out. Intel said that there are over 100 tablet-PC designs that will reach the market in the months ahead.The surprise decline in PC bell-weathers also hurt shares for many other technology Despite Micron forecast to provide 64.6% upside, semiconductor chip companies have the highest risk as sentiment shifts down. The companies with the most downside are NVIDIA (NVDA), Micron (MU), and AMD (AMD). AMD is trading at 30% below its target price. These companies have costs associated with plant utilization. Intel is already reducing its supply for chip production in the weeks ahead, in anticipation of reduced demand. Hard-drive maker Western Digital (WDC), who benefited from a shortage in early-2012, will also be face lower demand as PC-sales drop this quarter. LSI Corporation (LSI), JDS Uniphase (JDSU), virtualization software maker Citrix Systems (CTXS), and Agilent Technologies (A) rely on corporate demand. These customers are cautious on their spending, but the demand is not declining as fast as on the consumer side. Written by Kapitall’s Chris Lau. Disclosure: Author may acquire shares in NVIDIA within 72 hours of this publication. To interact and discuss these picks with users, attach your watch list or portfolio to your friends on Kapitall. Message the author. He is ranked sixth (by points) on the all-time leaderboard. The leaderboard is located on your score icon -> Leaderboard. Members on Kapitall earn free points, and even more points with every Kapitall Generation trade. These points may be redeemed for goods at the Kapitall store.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV