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Tuesday, 11 Oct 2011
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Recommendations and Target Prices

UNDERSTANDING BROKER RECOMMENDATIONS

STUPID QUESTION - How do brokers define their buy, hold, sell recommendations?  It seems odd to have a target price 20-30% above market price and yet consider the stock a ‘hold’.  For example, see today’s broker reviews of WOW – 3 brokers (GSJB Were, Citi, Macquarie) are recommending hold with targets 28.6%, 12% & 21% above market, whereas the broker (JP Morgan) recommending a buy has a target price only 11% above the current share price.

REPLY: It depends on the broker. They all have different definitions of what constitutes a recommendation, you have to go to the back of the research (see examples below). Some brokers are quite Robotic

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