Exact Sciences
(EXAS) closed the last trading session at $45.43, gaining 1.4% over the past four weeks, but there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $61.09 indicates a 34.5% upside potential.
The mean estimate comprises 11 short-term price targets with a standard deviation of $13.38. While the lowest estimate of $35 indicates a 23% decline from the current price level, the most optimistic analyst expects the stock to surge 87.1% to reach $85. It’s very important to note the standard deviation here, as it helps understand the variability of the estimates. The smaller the standard deviation, the greater the agreement among analysts.
While the consensus price target is highly sought after by investors, the ability and unbiasedness of analysts in setting price targets have long been questionable. And investors making investment decisions solely based on this tool would arguably do themselves a disservice.
But, for EXAS, an impressive average price target is not the only indicator of a potential upside. Strong agreement among analysts about the company’s ability to report better earnings than they predicted earlier strengthens this view. While a positive trend in earnings estimate revisions doesn’t gauge how much a stock could gain, it has proven to be powerful in predicting an upside.
Price, Consensus and EPS Surprise
Here’s What You Should Know About Analysts’ Price Targets
According to researchers at several universities across the globe, a price target is one of many pieces of information about a stock that misleads investors far more often than it guides. In fact, empirical research shows that price targets set by several analysts, irrespective of the extent of agreement, rarely indicate where the price of a stock could actually be heading.
While Wall Street analysts have deep knowledge of a company’s fundamentals and the sensitivity of its business to economic and industry issues, many of them tend to set overly optimistic price targets. Are you wondering why?
They usually do that to drum up interest in shares of companies that their firms either have existing business relationships with or are looking to be associated with. In other words, business incentives of firms covering a stock often result in inflated price targets set by analysts.
However, a tight clustering of price targets, which is represented by a low standard deviation, indicates that analysts have a high degree of agreement about the direction and magnitude of a stock’s price movement. While that doesn’t necessarily mean the stock will hit the average price target, it could be a good starting point for further research aimed at identifying the potential fundamental driving forces.
That said, while investors should not entirely ignore price targets, making an investment decision solely based on them could lead to disappointing ROI. So, price targets should always be treated with a high degree of skepticism.
Why EXAS Could Witness a Solid Upside
There has been increasing optimism among analysts lately about the company’s earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher. And that could be a legitimate reason to expect an upside in the stock. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.
The Zacks Consensus Estimate for the current year has increased 2.8% over the past month, as two estimates have gone higher compared to no negative revision.
Moreover, EXAS currently has a Zacks Rank #2 (Buy), which means it is in the top 20% of more than the 4,000 stocks that we rank based on four factors related to earnings estimates. Given an impressive
externally-audited track record
, this is a more conclusive indication of the stock’s potential upside in the near term. You can see
the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>
Therefore, while the consensus price target may not be a reliable indicator of how much EXAS could gain, the direction of price movement it implies does appear to be a good guide.
Free Report Reveals How You Could Profit from the Growing Electric Vehicle Industry
Globally, electric car sales continue their remarkable growth even after breaking records in 2021. High gas prices have fueled his demand, but so has evolving EV comfort, features and technology. So, the fervor for EVs will be around long after gas prices normalize. Not only are manufacturers seeing record-high profits, but producers of EV-related technology are raking in the dough as well. Do you know how to cash in? If not, we have the perfect report for you – and it’s FREE! Today, don’t miss your chance to download Zacks’ top 5 stocks for the electric vehicle revolution at no cost and with no obligation.
>>Send me my free report on the top 5 EV stocks
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
