Analysts See 16% Gains Ahead For The Holdings Of The First Trust Dow Jones Internet Index Fund ETF
Looking at the underlying holdings of the ETFs in our coverage universe at ETF Channel, we have compared the trading price of each holding against the average analyst 12-month forward target price, and computed the weighted average implied analyst target price for the ETF itself. For the First Trust Dow Jones Internet Index Fund ETF (FDN), we found that the implied analyst target price for the ETF based upon its underlying holdings is $161.10 per unit.
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With FDN trading at a recent price near $139.12 per unit, that means that analysts see 15.80% upside for this ETF looking through to the average analyst targets of the underlying holdings. Three of FDN’s underlying holdings with notable upside to their analyst target prices are Groupon, CommScope Holding and Netflix. Although GRPN has traded at a recent price of $2.39/share, the average analyst target is 53.56% higher at $3.67/share. Similarly, COMM has 22.15% upside from the recent share price of $14.19 if the average analyst target price of $17.33/share is reached, and analysts on average are expecting NFLX to reach a target price of $377.27/share, which is 16.60% above the recent price of $323.57. Below is a twelve month price history chart comparing the stock performance of GRPN, COMM, and NFLX:
Combined, GRPN, COMM, and NFLX represent 6.69% of the First Trust Dow Jones Internet Index Fund ETF.
Do the analysts have a valid justification for their targets, or are they behind the curve on recent company and industry developments? A high price target relative to a stock’s trading price can reflect optimism about the future, but can also be a precursor to target price downgrades if the targets were a relic of the past. These are questions that require further investor research.