Wall Street's latest stunt: $1,000 stock price target
By Jack Reerink
NEW YORK, April 7 (Reuters) - It's the latest stunt for obscure Wall Street analysts: predict the price of a hot stock will hit $1,000 and create instant buzz around the shares -- and yourself.
That's exactly what Thomas Bock, a 28-year-old, little- known analyst of brokerage SG Cowen, did on Thursday when he said the shares of British online auctioneer QXL.com (quote from Yahoo! UK & Ireland: QXL.L)(NasdaqNM:QXLC - news) could rise almost 15 times to $1,000 in the next two years.
The idea was not new -- a former colleague of Bock's put a $1,000 price target on another stock just three months ago -- but it did double QXL.com's share price in just one day and splashed Bock's name over the wires, Web and papers.
``It's a feeding frenzy. It's 'Can you top this?',' said Chuck Hill, the director of research of market research firm First Call/Thomson Financial and a former technology analyst. ``It's anything to get attention.'
The bold forecasts come at a time Wall Street analysts are gaining celebrity status and million dollar-plus pay packages. Morgan Stanley Dean Witter & Co.(NYSE:MWD - news) Internet analyst Mary Meeker, for example, has been dubbed 'Queen of the Internet' and is much sought after by media, corporate executives and investment bankers.
In the heady 1980s, deal makers grabbed headlines and analysts crunched numbers in back rooms of securities houses. That has changed in recent years, especially for analysts who cover the 'New Economy,' businesses related to the Internet.
Part of the reason is insatiable investor appetite for shares of companies that employ new technologies. Securities firms also count on analysts to find start-up technology companies that may go public. New stock offering are among Wall Street's most lucrative businesses.
Many young, computer-savvy professionals have taken to covering the hot technology sector. But SG Cowen, which is a unit of French bank Societe Generale , said Bock did not put out his bold prediction to stand out in a crowded field.
``It was not a publicity stunt. It was equity analysis,' said SG Cowen spokesman Adam Brecht.
Bock, who based his QXL.com price target mostly on U.S. Web auctioneer eBay Inc.'s (NasdaqNM:EBAY - news) $25 billion market value, was traveling and could not be reached for comment.
Bock joined SG Cowen just a month ago from PaineWebber Group Inc. (NYSE:PWJ - news), where he had covered Internet companies such as America Online Inc. (NYSE:AOL - news) as a junior analyst for two to three years.
Bock may have gotten the idea to issue a $1,000 price target from his former colleague Walter Piecyk, a PaineWebber technology analyst. Piecyk, also 28, said in late December that he believed shares of Qualcomm Inc. (NasdaqNM:QCOM - news) could hit $1,000 in a year.
Piecyk made his recommendation one day before Qualcomm split its shares four-for-one, just in time to issue the unheard-of $1,000 target. Bock employed a similar tactic and put out his recommendation on the day QXL.com split its shares three-for-one.
Piecyk was not immediately available on Friday and a PaineWebber spokesman declined to comment on the issue.
The QXL.com stock split immediately reduced Bock's price target to a less eye-popping $333. Shares on Thursday initially more than quintupled to 117-3/16 before falling back to close at 51-63/64, still more than double what they were before Bock's recommendation. QXL.com's stock price fell a further 6-3/64, to close at 49-15/16 on Friday.
Some brokerage executives shook their heads when hearing about the episode and cautioned against putting out price targets that are far above a stock's current price.
``We try to give strong research and be incremental about price objectives,' said Frank Baxter, the chief executive of brokerage firm Jefferies Group Inc. (NYSE:JEF - news). ``There's not going to be any stratospheric projections because you just cannot make them.'
Hill, who covered technology in the 1970s and 1980s, said the bull market in technology stocks has made for a lot of sloppy analysis and hype.
``I don't think there are enough of these guys who really do their homework. All you have to do is a have a good story and it runs,' Hill said. ``They've never been through a downturn. We'll sort out the analysts as well as the companies when there is a correction.' |
