Many investors rely on the recommendations of Wall Street analysts to make informed decisions about buying, selling, or holding stocks. But do these recommendations really make a difference in the stock’s performance?
Before we explore the reliability of brokerage recommendations and how to use them to your advantage, let’s see what experts on Wall Street think about Celsius Holdings Inc. (CELH).
The average brokerage recommendation (ABR) for Celsius Holdings Inc. is currently 1.20, on a scale of 1 to 5. This rating is based on recommendations from 10 different brokerage firms. An ABR of 1.20 suggests a strong buy.
Of the 10 recommendations contributing to the ABR, nine are classified as strong buy, accounting for 90% of the total recommendations.
Analysts’ Confidence in Celsius Holdings Inc. (ABR Trends)
Although the ABR suggests buying Celsius Holdings Inc., it’s important not to base your investment decision solely on this information. Studies have shown mixed results regarding the success of brokerage recommendations in predicting stock price increases.
The biased nature of brokerage firms, influenced by their vested interests, often leads to an optimistic bias in their ratings. Our research indicates that brokerage firms issue five “strong buy” recommendations for every “strong sell” recommendation.
Therefore, their ratings may not always align with the interests of individual investors or accurately predict the future stock price. It’s recommended to use these recommendations as validation for your own research or as confirmation of a highly successful indicator for predicting stock price movements.
ABR vs. Zacks Rank: What’s the Difference?
While both the ABR and Zacks Rank are displayed on a scale of 1-5, they are distinct measures.
The ABR is solely based on brokerage recommendations and is typically displayed with decimals (e.g., 1.28). The Zacks Rank, on the other hand, is a quantitative model that utilizes earnings estimate revisions as a powerful indicator. It is displayed as whole numbers ranging from 1 to 5.
Brokerage analysts tend to be overly optimistic in their recommendations due to their employers’ vested interests. In contrast, the Zacks Rank is driven by actual earnings estimate revisions, which have been found to strongly correlate with short-term stock price movements.
The Zacks Rank applies different grades proportionately to stocks based on the current-year earnings estimates provided by brokerage analysts. This ensures a balanced representation across all five ranks.
Another significant difference between the ABR and Zacks Rank is freshness. The ABR may not always be up-to-date, while the Zacks Rank quickly incorporates analysts’ revised earnings estimates to provide timely predictions of future stock prices.
Is CELH Worth Investing In?
Considering the recent earnings estimate revisions for Celsius Holdings Inc., the Zacks Consensus Estimate for the current year has increased by 30.4% in the past month, reaching $1.81.
Analysts’ growing optimism about the company’s earnings prospects, evidenced by their consensus in upwardly revising EPS estimates, could be a valid reason for the stock to experience significant growth in the near future.
The substantial change in consensus estimate, combined with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for Celsius Holdings Inc. To see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks, click here.
Therefore, in assessing Celsius Holdings Inc., the ABR’s buy-equivalent rating can be a helpful guide for investors.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.