What Do Stock Analyst Ratings Mean?

Wed Jun 15, 2022, 11:20 am | by Azhar Khan | No comments

Stock analyst ratings aren’t quite as simple as you might think. But they don’t have to be hard to understand, either. There are the obvious ratings like buy or sell, but some firms use other phrasing that can be confusing for new traders and investors.

We’ll break down what analyst ratings are, what do they mean, and how to find them in this week’s blog post. 

What are Analyst Ratings? 

Analysts ratings are reports from financial analysts where the analysts give a rating on a stock they analyze. A financial analyst will deeply research a stock, including looking into financial statements, listening to conference calls, talk to company stakeholders, and more to come to an educated decision on how the stock is performing.

After researching, the analyst will give their recommendation, usually on a quarterly basis. Conventionally, analysts give a rating and a price target for the stock a year from that date.

While analyst ratings should not be the basis for your trades, some traders use analyst ratings to inform their own thesis

What do Analyst Ratings Mean? 

Analyst ratings can be more than just “buy” “sell” and “neutral.” Each firm has its own rating system, and different phrasing can mean different things at different firms. For this blog post, we’re breaking down the most common ratings and what they mean.

While there are several different phrasings, analyst ratings usually are combined into the following five types of ratings. 

Buy: This is a recommendation to buy the stock. It can also be phrased as “strong buy.” This is an indication that the analyst thinks the stock will perform very well and are optimistic about the stock.

Outperform: This is generally regarded as a mild buy rating and will likely perform slightly better than the overall market movement. This can also be phrased as “overweight” or “moderate-buy.” 

Hold: This rating means that the analyst thinks that there is no reason to buy, but also no reason to sell. So if you own the stock, it is a recommendation to hold on to it. It can also be phrased as “market perform” or “equal-weight.” The analyst expects the stock to perform the same, or in-line with the overall market movement. 

Underperform: This is generally regarded as an expectation the stock will slightly underperform than the overall market movement. This can also be phrased as “underweight” or “moderate sell.” 

Sell: This is a recommendation to sell the stock. This can also be phrased as “strong sell.” The analyst is not optimistic about the stock’s performance. 

For a complete breakdown of analyst ratings from firm-to-firm, check out this list from MarketWatch

Analyst ratings do not mean the stock will perform the same as the analyst’s ratings. Sometimes, different analysts disagree on where the stock is headed, or an unexpected event could take place. As mentioned previously, you should never base a trading decision solely on analyst ratings—it is important to do your own research, too. 

How to Find Ratings

Analyst ratings are pretty straightforward to find, and Benzinga makes it easy with our free stock analyst ratings calendar. You can filter by day and/or by action, such as upgrades, initiations, downgrades and more. 

Screenshot from Benzinga.com's Analyst Ratings calendar.
Screenshot from Benzinga.com’s Analyst Ratings calendar.

If you’re a day trader and looking for something a little more robust, you can start a free trial of Benzinga Pro to use our Newsfeed, Analyst Ratings Calendar, and more.

In the Benzinga Pro Newsfeed, you can filter by Analyst Ratings to see all news and headlines (and notifications) related to analyst ratings. 

You can also use the Calendar tool to get a detailed look at analyst ratings, including upgrades, downgrades, action, and the new and previous price targets. 

Screenshot from Benzinga Pro's Analyst Ratings calendar.
Screenshot from Benzinga Pro’s Analyst Ratings calendar.

Final Thoughts

Stock analyst ratings are just one piece of the puzzle—they shouldn’t be the reason you trade a certain stock, but can be good to keep on top of. Every analyst firm has its own rating system, but can be generally divided into five categories:

  • Buy
  • Outperform
  • Hold
  • Underperform
  • Sell

You can also easily keep track of analyst ratings, using something like the free Benzinga.com calendar, or the premium Benzinga Pro tool.

Disclaimer: Benzinga is a news organization and does not provide financial advice and does not issue stock recommendations or offers to buy stock or sell any security. Benzinga Pro is for informational purposes and should not be viewed as recommendations. Benzinga Pro will never tell you whether to buy or sell a stock. It will only inform your trading decisions. You can find our full disclaimer located here.