The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?
Let's take a look at what these Wall Street heavyweights have to say about Fiverr International (NYSE: FVRR) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
Fiverr currently has an average brokerage recommendation of 1.82, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 11 brokerage firms. An ABR of 1.82 approximates between Strong Buy and Buy.
Of the 11 recommendations that derive the current ABR, six are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 54.6% and 9.1% of all recommendations.
Brokerage Recommendation Trends for FVRR
The ABR suggests buying Fiverr, but making an investment decision solely on the basis of this information might not be a good idea. According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.
Do you wonder why? As a result ...
