*4.1. Analysis of Target Returns and Coverage*

The average mean target return for the clean energy companies is 22.23% compared to the stock price at that time. It is unsurprising that the average low return is −8.12%, considerably lower, and the average high return is 58.20%, considerably higher than that. However, as Figure 3 illustrates, the magnitude of low, mean, and high target returns can differ considerably. *Sustainability* **2021**, *13*, x FOR PEER REVIEW 8 of 29

**Figure 3.** Distribution of low, mean, and high target returns. **Figure 3.** Distribution of low, mean, and high target returns.

It is apparent that the low target return distribution has the lowest mean and earliest peak of all distributions, followed by the mean target return and, lastly, the high target return. The first interesting observation is that low, mean, and high target returns can all be below and above the current stock price (=0% target return). For the low target prices, about 70% are below zero—implying an expected decline of the stock price over the next year. However, roughly 30% of the low target returns show the expectation of a positive return over the next year. Since the low target price reflects the lowest expectation of all analysts covering the stock, the low target price exceeding the current stock price may reflect the consensus belief of all analysts that the stock is undervalued. (It may be noted that at any point some target prices may have been provided days or weeks before the date of the observation and, thus, can potentially reflect outdated beliefs of the analysts that may be corrected in the future. Additionally, mean target prices, especially when based on numerous separate analyst target prices, may react slowly to changing market conditions or stock information since this may require many analysts to revise their target prices in a timely manner in order to affect the mean target price considerably and rapidly.) For the mean and high target prices, most implied returns are positive. About 79% It is apparent that the low target return distribution has the lowest mean and earliest peak of all distributions, followed by the mean target return and, lastly, the high target return. The first interesting observation is that low, mean, and high target returns can all be below and above the current stock price (=0% target return). For the low target prices, about 70% are below zero—implying an expected decline of the stock price over the next year. However, roughly 30% of the low target returns show the expectation of a positive return over the next year. Since the low target price reflects the lowest expectation of all analysts covering the stock, the low target price exceeding the current stock price may reflect the consensus belief of all analysts that the stock is undervalued. (It may be noted that at any point some target prices may have been provided days or weeks before the date of the observation and, thus, can potentially reflect outdated beliefs of the analysts that may be corrected in the future. Additionally, mean target prices, especially when based on numerous separate analyst target prices, may react slowly to changing market conditions or stock information since this may require many analysts to revise their target prices in a timely manner in order to affect the mean target price considerably and rapidly.) For the mean and high target prices, most implied returns are positive. About 79% of the mean

amounts to 96.7%. It is interesting to note that high prices tend to be highly positive but there appears to be also a small tail for target returns below zero. A high target return below zero, which is only the case for roughly 3.3% of the observations, reflects that all current analyst targets indicate that the stock is likely overvalued and will decline within the next year. It is noteworthy that all, the largest high target return (2′403.5%), the largest mean target return (1′835.0%), and the largest low target (363.6%) are linked to the stock of "Fuelcell Energy". In this extreme example, the target prices were lagging behind the stock price, which had declined considerably to new lows in mid-June of 2019. In general, for those 3.3% observations with a high price below the current price, the stock prices had increased or recovered from a decline and the target prices were lagging behind this surge. Similarly, the reason for some low target prices (about 4%) being 50% or higher over the current stock price was a decline in the stock price and the mean target prices' delayed correction for this decline. Moreover, both these cases—stock prices exceeding the high price considerably and low prices exceeding the stock price considerably tend both to be

associated with a low number of analysts covering them (usually 1–2 analysts).

target returns exceed zero and for the high price, this percentage even amounts to 96.7%. It is interesting to note that high prices tend to be highly positive but there appears to be also a small tail for target returns below zero. A high target return below zero, which is only the case for roughly 3.3% of the observations, reflects that all current analyst targets indicate that the stock is likely overvalued and will decline within the next year. It is noteworthy that all, the largest high target return (2403.5%), the largest mean target return (1835.0%), and the largest low target (363.6%) are linked to the stock of "Fuelcell Energy". In this extreme example, the target prices were lagging behind the stock price, which had declined considerably to new lows in mid-June of 2019. In general, for those 3.3% observations with a high price below the current price, the stock prices had increased or recovered from a decline and the target prices were lagging behind this surge. Similarly, the reason for some low target prices (about 4%) being 50% or higher over the current stock price was a decline in the stock price and the mean target prices' delayed correction for this decline. Moreover, both these cases—stock prices exceeding the high price considerably and low prices exceeding the stock price considerably tend both to be associated with a low number of analysts covering them (usually 1–2 analysts). *Sustainability* **2021**, *13*, x FOR PEER REVIEW 9 of 29 Figure 4 shows the median low, mean, and high target return as well as the median

> Figure 4 shows the median low, mean, and high target return as well as the median number of analysts covering a stock for each year. number of analysts covering a stock for each year.

**Figure 4.** Median of the low, mean, and high target returns by year. **Figure 4.** Median of the low, mean, and high target returns by year.

It is apparent that the target returns vary between years, with the high returns appearing most optimistic between 2009 and 2012 with medians around 50%. The low target return is with median values between −5.4% and −14.6%, consistently negative, whereas the median values for the mean and high target returns are consistently positive. The median for the mean target return ranges from 4.6% to 17.9% and for the high target return even from 24.0% to 58.7%. The median number of analysts covering a stock is between (about) 9 to 14. Overall, the median number of analyst target prices at any time is 10, the minimum 1 and the maximum number of analyst targets is 39. It is apparent that the target returns vary between years, with the high returns appearing most optimistic between 2009 and 2012 with medians around 50%. The low target return is with median values between −5.4% and −14.6%, consistently negative, whereas the median values for the mean and high target returns are consistently positive. The median for the mean target return ranges from 4.6% to 17.9% and for the high target return even from 24.0% to 58.7%. The median number of analysts covering a stock is between (about) 9 to 14. Overall, the median number of analyst target prices at any time is 10, the minimum 1 and the maximum number of analyst targets is 39.
