Investors often rely on the recommendations of Wall Street analysts when deciding whether to buy, sell, or hold a stock. Media coverage of rating changes by (or sell-side) analysts working for these brokerages often influences stock prices. But do they really matter?
Before we discuss how reliable a broker’s recommendations are and how you can use them to your advantage, let’s take a look at what some of the biggest names on Wall Street think about Dell Technologies (DELL).
Dell Technologies currently has an Average Broken Recommendation (ABR) of 1.38 on a scale of 1 to 5 (Strong Buy vs. Strong Sell). It is calculated based on actual recommendations (buy, hold, sell, etc.) from 20 brokerage firms. . ABR 1.38 is an approximation between strong buy and buy.
Of the 20 recommendations that lead to the current ABR, 15 are strong buys and 2 are buys. “Strong Buy” and “Buy” account for 75% and 10% of all recommendations, respectively.
DELL Broker Rating Breakdown
Click here for Dell Technologies target price and stock price forecast>>>
ABR suggests an acquisition of Dell Technologies, but it may not be a good idea to make an investment decision based solely on this information. Several studies have shown that brokerage recommendations have little success in encouraging investors to select stocks with the highest potential for price appreciation.
Wondering why? Because securities companies have a vested interest in the stocks they cover, analysts tend to evaluate them with a strong positive bias. Our research shows that brokerages assign 5 “strong buy” recommendations for every “strong sell” recommendation.
In other words, their interests are not always aligned with retail investors, and they are rarely indicative of where stock prices are actually going. Therefore, the best use of this information is to examine independent research and indicators that have proven to be highly successful in predicting stock price movements.
The Zacks Rank, our proprietary, outside-audited stock rating tool, classifies stocks into five groups ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). It is an effective indicator for evaluating stock prices. cost performance in the near future. Therefore, examining the Zacks Rank using ABR can be an efficient way to make profitable investment decisions.
Although the Zacks Rank and ABR both range from 1 to 5, they are two entirely different scales.
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ABR is calculated based solely on broker recommendations and is usually expressed as a decimal (for example, 1.28). The Zacks Rank, by contrast, is a quantitative model that allows investors to harness the power of earnings estimate revisions. Displayed as an integer from 1 to 5.
Analysts employed by brokerage firms have been, and continue to be, overly optimistic in their recommendations. The ratings issued by these analysts are far more likely to mislead investors than they lead, as they are more favorable than what the research supports due to the vested interests of their employers. .
On the other hand, earnings estimate revisions are at the core of the Zacks Rank. Empirical research has shown that there is a strong correlation between trends in earnings forecast revisions and short-term stock price movements.
Additionally, the different grades of the Zacks Rank are applied proportionately to all stocks for which securities analysts provide current year earnings estimates. In other words, the tool always maintains a balance between the five assigned ranks.
There’s also a big difference between the ABR Rank and the Zacks Rank when it comes to freshness. If you check your ABR, it may not be up to date. Nevertheless, securities analysts are constantly revising their earnings estimates to reflect changing business trends, and their actions are immediately reflected in the Zacks Rank, making it a good time to predict future stock prices. I’m Lee.
In terms of earnings estimate revisions for Dell Technologies, the Zacks Consensus Estimate for the current fiscal year remained unchanged over the past month at $7.82.
A stable view from analysts on the company’s earnings outlook, with no changes to consensus estimates indicated, could be a good reason for the stock to be in line with the broader market in the near term.
The magnitude of the recent consensus estimate change, along with three other factors related to the earnings estimate, has led to a Zacks Rank of #3 (Hold) for Dell Technologies. You can see the complete list of today’s Zacks #1 Rank #1 (Strong Buy) stocks here >>>>
So it might be wise to be a little cautious about Dell Technologies’ purchase equivalent ABR.
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Dell Technologies Inc. (DELL): Free Stock Analysis Report
Adnan is a passionate doctor from Pakistan with a keen interest in exploring the world of politics, sports, and international affairs. As an avid reader and lifelong learner, he is deeply committed to sharing insights, perspectives, and thought-provoking ideas. His journey combines a love for knowledge with an analytical approach to current events, aiming to inspire meaningful conversations and broaden understanding across a wide range of topics.
