When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?
Let's take a look at what these Wall Street heavyweights have to say about CrowdStrike Holdings (NASDAQ: CRWD) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
CrowdStrike currently has an average brokerage recommendation of 1.31, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 42 brokerage firms. An ABR of 1.31 approximates between Strong Buy and Buy.
Of the 42 recommendations that derive the current ABR, 34 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 81% and 7.1% of all recommendations.
Brokerage Recommendation Trends for CRWD
While the ABR calls for buying CrowdStrike, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.
Do you wonder why? As a result of the vested interest of brokerage firms in ...
