Wednesday, December 2, 2009

Stock price = $43.81. Stock Target = $41. And it's a BUY?????? (ED)

Head scratcher?

Deutsche Bank initiated coverage of New York utility Con Edison (ED) with a BUY rating today.  No problem there.

What's a bit strange is that their price target of $41 is BELOW yesterday's closing price of $43.31.  Why would they be suggesting you buy shares if they feel fair value is lower?  It's due to the "total return," which would include Con Edison's dividend of  $2.36 per share, for a yield of over 5%.  

Still though, $2.36 per share PLUS the target price of $41 gets to $43.36, and the stock is fifty cents higher than that as I write this.

Nice big fat yield with this dividend, but I don't see how they can call this a BUY instead of a NEUTRAL or HOLD. 

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