Shares of T. Rowe Price Are Skyrocketing - Can This Trend Continue?

During today's afternoon trading session, T. Rowe Price took the market by storm, rocketing to $130.36 per share despite it now being above its mean target price of $94. This 8.6% movement implies there may not be much more room for upwards movement for the stock — if its analysts are to be believed. They are giving the Asset Management stock on average rating of hold, with target prices ranging from 65 to 113 dollars per share.

To understand the market's outlook on the stock, we can look at T. Rowe Price's short interest: the proportion of the fshare float that is tied to short positions. Behind each short position is an investor who believes that the stock will decline in the future. Here, the stock's short interest is 8.7% which means the outlook is split.

Short selling involves borrowing shares and then selling them at current market prices. In the successful version of the strategy, the shares are purchased at a lower price at some time in the future. The investor then returns the shares to the lender, and keeps the profit made on the sell/buy transaction.

Another way to gauge the sentiment on T. Rowe Price is to look at the percentage of institutions that are invested in the stock. In this case, 78.5% of the shares are held by pension, mutual, and hedge funds, which shows that these institutions probably have strong confidence in the stock.

If institutions are invested in a particular stock, it shows in most cases that they have performed quality research and concluded that it is a good investment. In some cases, however, increases in institutional ownership could be a sign of a takeover attempt or proxy fight, which can actually injure share prices. Also, institutions are not infallible, and can certainly make miscalculations -- often with spectacular results.

Overall, there is mixed market sentiment on T. Rowe Price because its an analyst belief that shares are overpriced, a hold rating, an above average percentage of its shares sold short, and an average number of institutional investors. Warren Buffett famously said that in the short term, markets are voting mechanisms, but in the long term, they are weighing mechanisms. This means that long term investors should be aware of a stock's fundamentals before committing.

Buffett was one of the fist investors to focus on free cash flow as a yardstick for a company's health. Here are TROW's recent cash flows:

Date Reported Cash Flow from Operations ($ MM) Capital expenditures ($ MM) Free Cash Flow ($ MM) YoY Growth (%)
2022-12-31 2,359 0 2,359 -26.56
2021-12-31 3,452 -239 3,213 88.52
2020-12-31 1,919 -215 1,704 29.3
2019-12-31 1,523 -205 1,318 n/a
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.