FP says analysts downgrade Poseidon a bit on late side

2012-11-20 07:15 ET - In the News


The Financial Post reports in its Tuesday edition analysts often receive most of their pay from a bonus pool. Post columnist Martin Pelletier writes this means that despite Chinese walls, there is plenty of room for conflict of interest. Some claim this is the reason why most recommendations are "buys." Therefore, it is prudent to read as much research as possible from different firms, including independent ones that do not have corporate finance business arms. Analysts with an excess number of stocks under coverage may find it challenging to do a thorough job of properly analyzing all of them given the demands on their time. The problem with relying on management for information is that it may not be very forthcoming, resulting in some terrible surprises. Last week, for example, Poseidon Concepts released shocking third quarter results that few, if any, analysts were prepared for. Investors reacted by sending the company's share price down to $5 from $13.22, a whopping 62-per-cent drop in one day. Prior to the sell-off, 82 per cent of the recommendations were buys with an average target price of $18.85 per share. Analysts responded to the news by cutting their target prices in half. Hardly timely advice.