Understanding Wall Street Analyst Recommendations for Axon (AXON)
Investors often look to Wall Street analysts when deciding to buy, sell, or hold stocks. Changes in recommendations from brokerage analysts can significantly influence stock prices. But how much do these recommendations really matter?
Let’s explore the insights provided by Wall Street analysts regarding Axon Enterprise (AXON) while also examining the reliability of brokerage recommendations and how they can assist investors.
Current Recommendations for Axon
Axon currently holds an average brokerage recommendation (ABR) of 1.43 on a scale from 1 (Strong Buy) to 5 (Strong Sell). This rating is based on the recommendations from 15 brokerage firms. An ABR of 1.43 falls between a Strong Buy and a Buy.
From the 15 recommendations reflected in the current ABR, 10 are designated as Strong Buy and three as Buy. This translates to 66.7% classified as Strong Buy and 20% as Buy.
Analyzing Brokerage Recommendation Trends for AXON
Check price target & stock forecast for Axon here>>>
While the ABR indicates a buying recommendation, relying solely on this metric for investment decisions may not be advisable. Research indicates that brokerage recommendations often fail to guide investors toward stocks with the highest potential for appreciation.
What causes this discrepancy? Brokerage analysts typically exhibit a positive bias in their ratings, driven by the vested interests of the brokerage firms. Our research shows that analysts give five “Strong Buy” recommendations for every “Strong Sell” rating.
This means that these recommendations might not align with the realities of stock price trajectories. Utilizing this information can be more effective as a way to support your own research or as a signal that strengthens other successful predictors of stock price movements.
Using Zacks Rank as a Complement to ABR
Zacks Rank is a proprietary rating tool with a strong audited track record, categorizing stocks from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). It serves as a reliable indicator of potential short-term stock price performance. Combining ABR with Zacks Rank may provide a more comprehensive framework for making investment decisions.
It is essential to note that Zacks Rank and ABR, while both scored from 1-5, are fundamentally different metrics. ABR is purely based on brokerage recommendations and often expressed with decimals (e.g., 1.28). In contrast, Zacks Rank uses a quantitative model based on earnings estimate revisions, represented in whole numbers.
As a trend, analysts at brokerage firms tend to be overly optimistic. Their conflict of interest can lead to an excess of favorable ratings that don’t necessarily reflect true market conditions. On the other hand, Zacks Rank is influenced directly by earnings estimate revisions, which empirically correlate with short-term stock price changes.
Furthermore, Zacks Rank evaluations are systematically applied to all stocks that have current earnings estimates from analysts. This ensures a balanced evaluation across its five ranks.
There is also a significant difference in how promptly the ABR and Zacks Rank reflect changes. The ABR may not be timely, whereas the Zacks Rank adjusts quickly to changing business trends due to regular revisions in earnings estimates from brokerage analysts.
Is AXON a Good Investment?
For Axon, the Zacks Consensus Estimate for the current year remains steady at $6.38, unchanged over the past month.
The stability in analysts’ earnings views, reflected by an unchanged consensus estimate, suggests that the stock may perform in line with broader market trends in the near term.
The current consensus estimate and accompanying factors have resulted in a Zacks Rank of #3 (Hold) for Axon. You can refer to today’s complete list of Zacks Rank #1 (Strong Buy) stocks here >>>>
Thus, it may be wise to approach the Buy-equivalent ABR for Axon with caution.
Zacks Identifies #1 Semiconductor Stock
This stock, just 1/9,000th the size of NVIDIA, which surged over 800% since our recommendation, is poised for growth. While NVIDIA remains strong, our new leading chip stock is well-positioned to capitalize on increasing demand for Artificial Intelligence, Machine Learning, and IoT.
Global semiconductor manufacturing is expected to rise from $452 billion in 2021 to $803 billion by 2028.
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Axon Enterprise, Inc (AXON): Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
