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 Booking Holdings (NASDAQ: BKNG) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.
Booking Holdings currently has an average brokerage recommendation of 1.71, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 34 brokerage firms. An ABR of 1.71 approximates between Strong Buy and Buy.
Of the 34 recommendations that derive the current ABR, 21 are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 61.8% and 5.9% of all recommendations.
Brokerage Recommendation Trends for BKNG
While the ABR calls for buying Booking Holdings, 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 ...
