Analysts and the rest of the Wall Street community spend a lot of time eagerly waiting for reports and financial information with the same eagerness your local Comic-Con goers await the newest Star Wars trailer. And both sci-fi junkies and analysts have lots of expectations. The sci-fi fans might expect the latest special effects, while money guys might expect that companies will post certain earnings or reach certain benchmarks on other metrics. These Wall Street predictions are known as "analyst expectations."
Analyst expectations are also known as "Street Numbers," or sometimes, collectively, as the "consensus estimate." These figures represent the numbers that money folks think a company will post for their quarterly earnings or other estimates—before said company actually posts the numbers.
Example: Let's say Cisco has told the Wall Street analysts (employees who work for brokerage houses to provide "expert" advice to investors) that it expects to earn 40-45 cents a share on $10.5-11 billion in revenues. One analyst publishes that they expect 43 cents on $10.652 billion; another analyst publishes that they expect 40 cents on $11.1 billion, etc. These individual estimates are then compiled into a consensus estimate that's used to judge the final result. When you see headlines like "Cisco Beats Expectations With Earnings Report" these are the estimates being referenced. See Whisper Number, Buy Side, and Sell Side for more gory details.
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Finance: What is a Sell Side Analyst?1 Views
finance a la shmoop what is a sell side analysts all right well they're the
brains of a stock brokerage more or less brokers essentially rent those brains to [Brain in a jar]
by side investors like hedge and mutual funds and wealthy family office
investors hoping that the genius insights of that sell side analysts will
entice the buy ciders to invest through the brokerage generating kindly loving [Bysider people standing by brain in a jar]
Commission's for the brokers got it in practice much investment banking and
corporate finance work is also generated via the reports created by that vaunted [Investment banking report document appears]
sell-side analysts and you can imagine if you're the CEO of itty bitty city
Corp comm and you read a glowing report from a sell side analysts who views your
stock today as a bargain at 12 bucks a share and puts in writing that they
think it'll be over a hundred bucks a share in three years if you were in fact
to do an offering like a selling stock or debt in your company well you'd
probably hire the firm who loved you above all other banks [Love hearts appear from bank building]
pushing you to hire them right that is you'd hire the bank who had a strong buy
on your stock long before you'd hire the one telling Wall Street to short you
well sell side analysts in theory are the investing whisperer of Wall Street [Young girl whispers in girls ear]
they don't actually pull the trigger and actually invest and live or die by their
own investment decisions instead they simply point out observations they've
made with dotted line recommendations to their constituency meaning the people
who read their reports as to what stocks to buy sell or hold well until
Regulation FD or full disclosure came along which required broad and full
disclosure of company information to their entire investing community all at
once sell side analysts were actively courted by the buy side so that the buy [Phone rings]
cider would be the first phone call from that sell side analysts when they were
gonna upgrade or downgrade a given security and then that buy cider could [Hedge fund manager answers phone]
buy it ahead of the rest of the world and make a quick buck or a few points
you know here and there the role was largely lambasted by regulators when it
came to light that some 95% of all investing recommendations
were a buy or strong buy with the sell-side analysts being urged [Cash placed on table by brain in a jar]
aggressively by the investment bankers who paid her to write glowing loving
things about the companies she covered well the result was more or less the end
of the sell-side analysts as a trusted respected role on Wall Street today
those once lucrative many million dollar-a-year jobs now receive anemic [Cash appears]
pay with anemic influence in a world where the buy-side simply stopped
trusting and/or listening to the recommendations of its brokers and [Girl cries and man walks away]
viewed the structure of the relationship as purely a utilitarian functionary one
where the job of the broker was to get the buyer the block of stock at the [Man with sack of stocks]
cheapest price possible that's it no frills so ya sell side analysts aren't
what they used to be which you know if you were on the itty-bitty City
Committee [Man throws cash into trash can]
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