Qantas: How come nine analysts had ‘buy’ ratings?

Qantas Limited (ASX: QAN) yesterday announced a surprise profit downgrade – well a surprise to many, but not me. As I mentioned a few weeks ago, “Airlines are notoriously bad investments – In aggregate airlines globally lose billions most years.”  The share price subsequently dropped 18.7% to close at $1.155.

What was most surprising to me was that nine out of 13 analysts had a ‘buy’ or ‘strong buy’ rating on the stock before the announcement. How did they get it so wrong? I have several possible explanations for that.

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