Wall Street Analysts Weigh In on Meta Platforms’ Stock Potential
Wall Street analysts play a crucial role in guiding investors on stock purchases, but how reliable are their recommendations? Recent insights on Meta Platforms (META) may shed some light.
Currently, Meta Platforms holds an average brokerage recommendation (ABR) of 1.35 on a scale of 1 to 5 (from Strong Buy to Strong Sell), based on evaluations from 48 brokerage firms. This number suggests a status between Strong Buy and Buy.
Out of these 48 recommendations, 41 are classified as Strong Buy, while one is a Buy. Collectively, these account for 85.4% and 2.1% of all ratings, respectively.
Understanding Brokerage Recommendations for META
To explore price targets and stock forecasts for Meta Platforms, click here>>>
While an ABR of 1.35 suggests buying Meta Platforms, relying solely on this information may be misguided. Research indicates that brokerage recommendations often lack the reliability needed to truly identify stocks likely to rise in value.
This skepticism stems from a potential bias. Brokerage firms often exhibit a strong positive bias towards the stocks they cover, issuing five Strong Buy ratings for each Strong Sell. This discrepancy can misalign the interests of brokerage firms and retail investors, offering limited insight into a stock’s potential price shifts. Thus, using these ratings to corroborate your own analysis or a proven predictive tool can be more effective.
Our proprietary stock rating tool, the Zacks Rank, provides a solid backing for stock performance predictions. This system rates stocks using five categories, from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), and is based on a robust track record. Combining the Zacks Rank with the ABR can inform investment decisions more effectively.
Clarifying the Difference Between Zacks Rank and ABR
Though both Zacks Rank and ABR scale from 1 to 5, they serve distinct purposes.
The ABR is solely based on brokerage recommendations, usually shown as decimals (e.g., 1.28). In contrast, the Zacks Rank offers a numerical interpretation focusing on earnings estimate revisions, and ranges from whole numbers 1 to 5.
Brokerage analysts tend to lean towards optimism in their ratings, often outperforming their research conclusions—predominantly due to influences from their firms. As a result, they frequently misguide investors rather than assist them.
On the other hand, the Zacks Rank derives its insights from earnings estimate changes, and empirical studies show that short-term price movements correlate closely with these trends.
Additionally, Zacks Rank grades are consistently applied across all stocks with current-year earnings estimates, ensuring balance in its evaluations.
Another key distinction lies in the recency of the data. The ABR might not be as up-to-date, while Zacks promptly reflects earnings estimate changes, ensuring timely predictions of stock price movements.
Should You Buy META Stock?
For Meta Platforms, the Zacks Consensus Estimate for this year has seen an increase of 0.3% in the last month, bringing it to $21.42.
A growing consensus among analysts to revise earnings estimates upward suggests potential for the stock to increase in value soon.
The recent upward revision of the consensus estimate, among other earnings-related factors, places Meta Platforms at a Zacks Rank #2 (Buy). For an up-to-date list of Zacks Rank #1 (Strong Buy) stocks, click here>>>>
Consequently, while the ABR for Meta Platforms indicates a Buy, it should be seen as a part of a broader investment strategy.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.