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Shares Syndax Pharmaceuticals The stock (SNDX), has gained 5.7% in the past four trading sessions to close at $25.60. However, there may still be solid upside if Wall Street analysts’ short-term price targets are any indication. Based on the price targets, the average estimate of $36.75 suggests a potential upside for 43.6%.
The average includes four short-term price targets, ranging in price from $33 to $41 with a standard deviation at $3.86. The lowest estimate shows a decrease of 28.9% from current price levels, but the highest estimate predicts a rise of 60.2%. The standard deviation is more important than the range. It helps to understand the variability in the estimates. The more agreement there is among analysts, the lower the standard deviation.
Although investors are keen to have a consensus price target, analysts’ ability and impartiality in setting price targets has long been questioned. Investors who base their investment decisions on this tool alone would be doing themselves a disservice.
SNDX’s potential upside is not only indicated by the impressive consensus price target. This is reinforced by analysts agreeing that the company will report stronger earnings than they previously predicted. Although a positive trend of earnings revisions does not give any indication as to the stock’s potential surge, it is effective at predicting one.
Price, Consensus, and EPS Surprise
Here are the facts about analysts’ price targets
Researchers from several universities around the world have found that a price target, which is just one piece of information about a stock, misleads more often than it guides. Empirical research has shown that price targets established by multiple analysts, regardless of their agreement, do not always indicate the actual direction of a stock’s price.
Wall Street analysts may have a deep understanding of the company’s fundamentals, and the sensitivity it has to economic and sector issues. But many Wall Street analysts set unrealistic price targets. Is this why?
This is usually done to increase interest in shares of companies their firms have business relationships with, or are interested in becoming associated with. Analysts often set high price targets because of business incentives.
A tight clustering in price targets, represented by a low average deviation, means that analysts are more likely to agree on the direction and size of a stock’s price movement. Although this does not necessarily indicate that the stock will reach the average price target it can be a useful starting point for further research to identify the possible fundamental driving forces.
Investors should not ignore price targets. However, relying solely on them can lead to poor ROI. Price targets must be approached with high levels of skepticism.
Here are some reasons why SNDX could still have a lot of upside
Analysts have been feeling more optimistic about the company’s earnings prospects lately, as evidenced by their strong agreement in revising EPS estimates up. That could be reason to expect a rise in stock prices. Empirical research has shown a strong correlation between changes in earnings estimates revisions and stock price movements in the near future.
The current year’s estimates have moved up by one estimate in the last 30 day, compared to zero negative revision. Therefore, the Zacks Consensus Expected has increased by 3.6%.
SNDX is currently a Zacks Rank 1 (Strong Buy) which means that it is among the top 5% of over 4,000 stocks. We rank them based on four factors, including earnings estimates. This is an even more convincing indicator of the stock’s upside potential in the short term, given its impressive track record externally audited. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>
Although the consensus price target might not be an accurate indicator of how much SNDX may gain, the direction that price movement implies seems to be a useful guide.
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Syndax Pharmaceuticals, Inc. (SNDX) : Free Stock Analysis Report