Logically yes, you should sell. However in practice, some brokers just adjust their price target upwards grabbing a fundamental fact or two which suits their change of sentiment. As an example, the brokers had consistently got BHP in the low 30s and high 20s until about a month ago when their targets started looking embarrassingly off the mark. Then JP Morgan downgraded it to $18 and three other analysts also moved their targets down (Citi, Macquarie and Morningstar). I have yet to see a broker who provides a detailed valuation methodology or technical analysis to support their price target which more than likely means their approach is nothing more than glorified guessing (yes, it is B.S.).
I think the analysts also had SGH on a high price targets before the latest misadventures caused its share price to come crashing down. And guess what, the targets also magically adjusted downwards from $7-$8 to $1 and thereabouts. I don't think any of the analysts questioned the big UK aquisition. Now SGH is valued significantly less than the capital it raised to pay for that acquisition.
If heaven forbid, DMP, come out and make a bad announcement, you will see the brokers move down their price targets after they see how much the market shaves off DMP's price. Likewise if DMP announce another acquisition which improves profitability, the brokers will see the market reaction and if the share price moves significantly ahead of their targets, they will move the target price ahead. Do not rely on brokers price targets as a guarantee of value.
DMP Price at posting:
$56.71 Sentiment: None Disclosure: Not Held
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