I wrote a piece about equity analysts a while back discussing their worth, and their recent performance on this stock has not increased my confidence in their work. “Behind the Curve” would be an apt description of what has been transpiring of late. This is unfortunate for them and the investors that follow their every move.
Below The RIMM
Investors are waking up to the sinkhole that has become Research In Motion (RIMM). We are seeing a disaster unfold in front of our eyes. The big question is where were the analysts warning the public about this? Instead of being proactive, they just downgrade the stock after the fact like lemmings. This is not value-added analysis, but mindless groupthink.
I won’t mention any specific brokerages, but one is actually maintaining its “Market Perform” rating and also is leaving its estimates unchanged. I am not sure if this is worse than mindlessly downgrading it after the fact. I have to seriously question the rating though. Unless this analyst thinks the market will crash, how can RIMM be a “Market Perform?” The stock is down over 55% this year while the indices are slightly green. Somebody explain the math to me here.
Another well known brokerage house stated that “we were caught off guard by management’s failure to acknowledge any problem with the company and its current strategic position.” Management has a bias and is often too optimistic, but it is the analyst’s job to be out in front and do the necessary research in order to determine that management is being too optimistic. In response to the quarter, this brokerage downgraded the price target to $20 from $45. This just seems like a terrible case of a “day late and a dollar short” in terms of hard hitting analysis.
Follow The Estimates
I continue to believe that the buy and sell recommendations from analysts are worthless, but their earnings estimates are valuable. The revisions of these average estimates give important clues as to the health of the companies. Make sure to follow these as opposed to acting on their actual recommendations. It’s unfortunate that such highly paid people don’t provide worthwhile recommendations, but we have to react to reality, not the way things should be.
Analysts Asleep At The Switch Again is an article from: 
