Trent2684 posted the perfect example as to why analysts opinions...

Trent2684 posted the perfect example as to why analysts opinions are nonsense today.

• https://hotcopper.com.au/threads/iron-ore-price.3290357/page-52687?post_id=74460665

Analysts take a cyclical approach (which basically means they try to price in what the market already know) whereas if you want to be particularly successful you need to be counter-cyclical around the right time (or have a strategy that achieves the same).

Some of the key points to take from FMG analyst research is:

• FMG's balance sheet is in good order.
• They have a bit of a cash flow crunch ahead of them (after dividends) IF IO prices drop as "predicted" (but that expenditure is somewhat discretionary).
• IF IO prices drop as "predicted" FMG may bit a bit over priced here (DCF, not 12 month target prices).
• HOWEVER, analysts factor in no valuation for Fortescue Future Industries (could be a meaningful error there).

The rest is total crap, especially their ratings and 12 month target prices.

I often read analyst research, but I am oblivious to their opinion and target prices.

My personal take on their research is I accept FMG is a little risky from a valuation perspective, but I "bet" that their IO target prices are just too pessamistic (based on my experience of them never achieving the same historically).