What Wall Street Analysts Are Saying
The stock market experienced a dip on Tuesday, with Apple and Tesla stocks taking a hit. But what about Netflix? Investors often look to Wall Street analysts for guidance, but do their recommendations really matter? Let’s take a closer look at what analysts are saying about Netflix and how to use this information to your advantage.
Netflix currently has an average brokerage recommendation (ABR) of 1.90, on a scale of 1 to 5 (Strong Buy to Strong Sell). This ABR is based on the recommendations of 36 brokerage firms, with 58.3% of them giving a Strong Buy rating and 2.8% giving a Buy rating. While this may seem like a positive sign, it’s important to consider the reliability of brokerage recommendations.
Studies have shown that brokerage recommendations have limited success in predicting a stock’s price increase potential. This is because analysts tend to have a strong positive bias towards the stocks they cover, as their employers have a vested interest in these stocks. In fact, for every “Strong Sell” recommendation, there are five “Strong Buy” recommendations.
So, how can investors use this information to their advantage? One way is to validate your own research or use a reliable indicator, such as the Zacks Rank. This proprietary stock rating tool has a proven track record of predicting a stock’s near-term price performance. By combining the Zacks Rank with the ABR, investors can make more informed decisions.
It’s important to note that the Zacks Rank and ABR are different measures. While the ABR is based solely on broker recommendations, the Zacks Rank is driven by earnings estimate revisions. This means that it is less influenced by the vested interests of brokerage firms and is more focused on a stock’s actual performance.
