Odeon
re: why don't analysts make more accurate earnings estimates.
Jack (#17277) and Paul (#17278) gave you excellent responses, with which I completely agree. It is not in the analyst's self-interest, nor in the interest of his firm or customers for him to be euphoric, even if competent. I'd like to add a couple of comments.
1. Remember, that an analyst works for a company which is in the business of making money. The company obviously can't hire an analyst for every stock, so each analyst has a sector for which he/she is responsible. If there are a lot of stocks in a sector, the analyst may not be able to devote a lot of time to any one stock, whereas we on SI can watch and devote our time exclusively to a small number of stocks of our choosing, which we then learn to know quite well.
2. DELL, because of its marketing structure, is inherently much more difficult to analyze. In the case of ACER, CPQ, or any company which retails through normal channels, one can survey a representative selection of retail outlets, and determine which products are going out the door and how fast. We have an advantage here, because when Michael says that DELL is growing at 3x the sector rate, we can evaluate his statement against what we know of him and his historical accuracy. Then we nod, and say, "Yup, time to buy more DELL." An analyst, IMO, would have his head handed to him on a platter if he based his estimates solely on what the CEO/CFO said, and it did not come to pass. I do not think that his superiors would accept an excuse beginning, "Well, Mikey said...".
Please note that this is the first quarter since I have been following DELL on SI (since March) that the analysts' estimates for DELL have exceeded the actual previous quarter's earnings. One year ago, DELL's earnings went from .28 to .39 (Q => Q), about a 40% increase. Although it would be wonderful, I don't really think we can expect a 40% increase over last quarter. Being the modest guy I am, I'd settle for 20% Q/Q. **ggg**
Current estimates:
Zack's .59 => .64
QuickSource .59 => .66
Who knows? Earnings may actually be down this quarter due to all the new building, hiring, new product line initiations, etc. But since I'm just a sort of credulous SI guy, who listens to Mikey, I'm buying calls and selling puts.
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