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The NE Paradox: Analysts Bearish But Forecast 22.2% Gains

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Analyst ratings can sometimes be complicated, and we here at ETF Channel have noticed a bit of a paradox with Noble Corp plc (Symbol: NE). The average 12-month price target for NE - averaging the work of 17 analysts - reveals an average price target of $6.78/share. That's a whopping 22.2% above where NE has been trading recently at $5.55/share. With this kind of capital gain potential (should NE reach that price target), one might expect to see a high concentration of "buy" or even "strong buy" ratings on the stock. Yet, take a look at the bearishness:

Recent NE Analyst Ratings Breakdown
Current 1 Month Ago 2 Month Ago 3 Month Ago
Strong buy ratings: 1 1 1 1
Buy ratings: 0 0 1 1
Hold ratings: 13 14 13 12
Sell ratings: 3 2 2 2
Strong sell ratings: 4 4 3 3
Average rating: 3.41 3.37 3.24 3.25

The average rating presented in the last row of the table above is from 1 to 5, where 1 would be a consensus Strong Buy and 5 would be a consensus Strong Sell. In the middle, 3 would be a Hold. So anything above 3 leans toward Sell as the average analyst sentiment. The average rating of 3.41 for NE leans towards Sell, yet the NE price target paints a different picture. Clearly, there is something more to the story here that is worth investigating for investors looking at Noble Corp plc. Of course, the average price target is just that - a mathematical average, and is only one metric. There are analysts with lower targets than the average, including one looking for a price of $3.30. And then on the other side of the spectrum one analyst has a target as high as $11.00. The standard deviation is $2.163.

But the whole reason to look at the average in the first place is to tap into a "wisdom of crowds" effort, putting together the contributions of all the individual minds who contributed to the ultimate number, as opposed to what just one particular expert believes - much like with guessing the number of jelly beans in a jar, where the average guess tends to be very close. And so with NE trading so far below that average target price of $6.78/share, the 22.2% upside to that average target does seem to be a paradox against the bearish analyst ratings. Might analysts be behind the curve with their targets and downward adjustments are forthcoming? Or, is it time for some of these analysts to turn bullish and upgrade? One thing is for sure: this apparent paradox makes for a good "signal" to investors in NE to spend fresh time assessing the company and deciding whether analysts have it right with their sentiment, or have it right with their price target for Noble Corp plc. This article used data provided by Zacks Investment Research via Quandl.com . Get the latest Zacks research report on NE - FREE .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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