The ABR is not necessarily up-to-date when you look at it. In other words, this tool always maintains a balance among its five ranks.Īnother key difference between the ABR and Zacks Rank is freshness. In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research. In contrast, the Zacks Rank is driven by earnings estimate revisions. Because of their employers' vested interests, these analysts issue more favorable ratings than their research would support, misguiding investors far more often than helping them. It has been and continues to be the case that analysts employed by brokerage firms are overly optimistic with their recommendations.

It is displayed in whole numbers - 1 to 5. The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.īroker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock's future price movement. Our research shows that for every 'Strong Sell' recommendation, brokerage firms assign five 'Strong Buy' recommendations. According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.Īre you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. The ABR suggests buying Alibaba, but making an investment decision solely on the basis of this information might not be a good idea.

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Alibaba price target