Analyzing Analyst Reports and Reality

Analysts play a very important function in capital markets. They analyze companies, process the information, and distribute insights and recommendations to investors. They play a critical role in capital formation, trading, and keeping the markets generally efficient. Despite their importance, analysts have often been criticized for conflict of interest. In fact, during the dot.com bubble, analysts have been accused of cheerleading poorly performing stocks. As a result, investment banks employing the analysts were fined by the government through Global Analyst Research Settlement. Even after the settlement, analysts are blamed for overly optimistic forecasts and continuing conflict of interest. In this project, you will analyze analyst reports and see whether analysts indeed overestimate the firm’s performance. In addition, you will determine the source of the error. Is it just optimism or potential conflict of interest? Furthermore, you will learn about the methods and techniques analysts use to value firms. Upon completion of the project, you will have a much better understanding of analysts and valuation approaches. You will also learn that what analysts suggest and your own due diligence may differ significantly. The project should be two pages (doubled spaced), using Times New Roman with a font size of 11-12. Please write a clear and concise report. For references, just paste link. 1. How has Tesla’s strategies worked out? List all Tesla’s plans and their outcomes. • Use 10-Ks and proxy statements for research (links listed below) or other outside research o https://www.sec.gov/cgi-bin/browse edgar?action=getcompany&CIK=0001318605&type=def+14a&dateb=&owner=exclude&count=40 o https://www.sec.gov/cgi-bin/browse-edgar?action=getcompany&CIK=0001318605&type=10-k&dateb=&owner=exclude&count=40 2. Using WRDS, compare Tesla’s financials and performance to its peers. What do you learn? • Data bases within WRDS o COMPUSTAT: Firm financials o CRSP: Firm prices, returns o IBES: Analyst Estimates      

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