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Recent Analyst Rating News

Apple Could Launch Foldable iPhone By 2023: Analyst

Apple Inc (NASDAQ: AAPL) could launch a foldable iPhone within two years, according to analyst Ming-Chi Kuo, MacRumors reported Monday. read more

DraftKings Analysts Cheer Strong Q4, Sports Betting Growth And SBTech Integration

DraftKings Inc (NASDAQ: DKNG) received several price target raises after the strong fourth quarter reported on Friday. The DraftKings Analysts: Canaccord Genuity analyst Michael Graham reiterates a Buy rating and raises the price target from $65 to $80. read more

4 Twitter Analysts Break Down New Features, Revenue Goals

At Twitter Inc's (NYSE: TWTR) analyst day Thursday, the company announced a range of new products that it believes will help the social media platform meet its 2023 user base read more

6 Catalysts Bank Stock Investors Should Watch In 2021

Rising interest rates and economic stimulus have been a winning combination for bank stock investors in recent months. read more

Why Groupon’s Stock Is Trading Higher By 30% Today

Shares of online marketplace company Groupon Inc (NASDAQ: GRPN) are trading higher by over 30%, continuing the momentum from Friday's session after the company's better-than-expected EPS and sales results. read more

Why Apple’s iPhone 13 Could Be A ‘Game Changer’ With 1TB Storage Option, Lidar

The iPhone supercycle that kickstarted with the launch of Apple Inc's (NASDAQ: AAPL) iPhone 12 will likely continue well into 2022, read more

Morgan Stanley Upgrades Spirit AeroSystems, Despite ‘Bumpy Road Ahead’

The market is likely to continue looking beyond Spirit AeroSystems Holdings, Inc.’s (NYSE: SPR) near- and medium-term execution issues. Instead, there will be a focus on expectations of normalized earnings in 2025, according to Morgan Stanley. read more

Survey Finds 72% Of Investors Believe Bitcoin Experiencing Another Bubble

Bitcoin (CRYPTO:BTC) prices were up 10.5% over the past 24 hours on Monday morning to above $48,000, but they remain well below their all-time high of $58,313. Bitcoin prices are now up 475% in the past year, and a new survey by DataTrek Research suggests investors think 2021 could be a sequel to 2018. read more

Why BofA Is Double Upgrading ON Semiconductor

ON Semiconductor Corp (NASDAQ: ON) faces improving restructuring and autos tailwinds, according to BofA Securities. The ON Semiconductor Analyst: Vivek Arya upgraded ON Semiconductor from Underperform to Buy, while raising the price target from $32 to $48. read more

JPMorgan Turns Bullish On Plug Power, Predicts ‘Meaningful Share Of Future Hydrogen Economy’

Plug Power Inc (NASDAQ: PLUG) shares were rallying Monday after the struggling alternative energy stock got a major Wall Street upgrade. read more

Morgan Stanley Cheers Boston Beer Company And Its ‘Compelling Long-Term Growth Story’

Sam Adams beer maker and Truly hard seltzer's parent company Boston Beer Company Inc (NYSE: SAM) offers investors an under-appreciated but "compelling long-term growth story," according to Morgan Stanley. read more

Benzinga’s Top Ratings Upgrades, Downgrades For March 1, 2021

  read more

When You Buy A Stock, Here’s How Much Cash The Company Actually Receives

When you buy $1,000 of a company’s stock in your Robinhood account, how much of that cash goes directly to help fund the company and its business operations? The answer is $0. read more

Why GameStop Stock Traders Should Beware The ‘Law Of Twos And Threes’

GameStop Corp. (NYSE: GME) shares closed at $101.74 Friday after the stock surged from under $45 on Wednesday to as high as $184.68 on Thursday. read more

In Bitcoin’s Path Back To $50,000, Institutional Investors, Whales Battle Miners

As Bitcoin (CRYPTO: BTC) trudges back on the path to $50,000, whales are battling the other dominant players — miners,  in the backdrop.  read more

What are Analyst Ratings?

Analyst ratings measure the expected performance of a stock during a given time period. Analysts and brokerage firms often use ratings when they issue stock recommendations to stock traders.

Analysts arrive at stock ratings after they research companies’ public financial statements, communicate with executives and customers and interact with companies in other ways.

Most analysts issue ratings 4 times a year, usually at 3-month intervals.

How to Use Analyst Ratings

As an investor or trader, you want to be able to use analyst ratings effectively. Here are steps you can take to understand how to synthesize all the information analysts report about a particular company and how to apply it to your own trades. 

Step 1: Check ratings history. 

In the short term, look to see whether analysts suggest an initiation, upgrade or downgrade for a particular stock. Understand how the rating changed compared to the previous rating and whether a price target gets announced or changed.

Sometimes the rating stays the same and only the price target changes, which could cause the stock to move in either direction, depending on the significance of the change between the 2 price targets.

Step 2: Check for other news.

In the short term, check to see how the stock reacts to positive or negative news. This will be an indication of the company’s outlook because analyst ratings usually come out after the company announces news (it’ll typically be earnings news).

Step 3: Look at the sector for news.

Check to see if other stocks in the sector also received similar ratings. This could indicate micro news, which refers to when the whole sector or specific company trades in a specific way due to news outside of one company.  

Step 4: Look at the note.

If available, look over the analyst note itself. The beginning of the note has the main information of the rating and price target. Investors should also take a look at the summary of the note, which you can find in the first couple pages and give you a concrete overview of the company. This can help you get an understanding of how analysts arrived at their thesis on the stock. 

An example of an analyst note. Source: Needham

Step 5: Make a decision.

After reviewing the analyst ratings (and whether the analyst proposes a change or initiation) and find the reason for that note. Make a decision based on the analyst thesis on the company. This should give you guidance on how to make your thesis. Analyst ratings are a good indication of what the professionals believe in the company or sector to help you get a better understanding of companies you’re interested in. 

Analyst Rating Accuracy

Analyst ratings are not set in stone and nobody knows indefinitely what a stock will do. Therefore, analyst ratings should be taken as an educated guess made by professionals who carefully study the specific company and sector in question. It’s not a surprise that the accuracy of each rating can vary by each individual analyst and specific ratings on companies. 

In other words, there’s no hard number or percentage on how accurate analyst ratings are because they are like educated guesses on what they think the stock will do based on their research and within that particular sector. In addition, each firm has so many analysts and so many different companies and you should use analyst ratings to inform your own trade ideas.

Where Analyst Ratings Come From

Analyst ratings come from stock analysts. Analysts “go deep” on companies within a particular industry or sector. Some analysts employ a top-down approach (they start with an industry or sector and look for excellent companies within that industry or sector) and other stock analysts choose a bottom-up approach, which means they start with the company first and connect the dots within that company’s sector or industry. Analysts evaluate:

  • Financial statements
  • Economic fundamentals
  • Suppliers, customers and competitors
  • Management quality
  • Business model
  • Revenue
  • Expenses 
  • Assets 
  • Liabilities 

Types of Stock Ratings

Stock ratings can range from simple “buy” and “sell” ratings to “equal weight” and “outperform” ratings. Here’s a quick overview of how analysts rate stocks.

Buy Rating

A “buy” rating indicates that an analyst is optimistic about a stock’s short-term or mid-term growth and recommends that traders purchase the stock. An analyst may even go so far as to indicate that a stock is a “strong buy.”

Sell Rating

A “sell” rating means that an analyst believes the stock will trend downward in a particular time frame. Analysts might even refer to a security as a “strong sell.” 

Hold

A “hold” rating suggests that investors should not buy more of or sell the specified stock because they believe the stock should perform in a way that’s consistent with the market or will perform similarly to comparable companies within that particular sector.

Underperform

An “underperform” rating means an analyst indicates that a stock is expected to perform below the market or sector average.

Outperform

An “outperform” rating means that an analyst expects a stock to outperform the market or sector average. 

Equal-Weight 

An equal weight rating means that an analyst believes that an individual stock’s performance will tie to the average of all the stocks that an analyst covers in that particular sector. This type of rating helps investors get a true comparison of stocks to each other within a particular sector or industry.

Price Target 

A price target is an analyst’s projection of a stock’s future price.

Should You Use Analyst Ratings to Inform Your Own Trades?

You can definitely use analyst ratings to inform your own trades and inform your own thesis but it’s a good idea to do your own research. 

Visit Benzinga News for more guidance on how to research companies and make decisions about research, trading and investing.

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