When making investment decisions, many investors turn to analyst recommendations. The opinions of Wall Street analysts can often impact a stock’s price. But how reliable are these recommendations and how can investors use them to their advantage? In this article, we will explore what Wall Street analysts have to say about Perion Network (PERI) and discuss the usefulness of brokerage recommendations.
Perion Network’s Brokerage Recommendation and Trend
Perion Network currently has an average brokerage recommendation (ABR) of 1.83, on a scale of 1 to 5, with 1 being a Strong Buy and 5 being a Strong Sell. This ABR is calculated based on recommendations from six brokerage firms. Of these recommendations, three are Strong Buy and one is Buy. Therefore, Strong Buy and Buy recommendations collectively make up 66.7% of all recommendations.
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Are Brokerage Recommendations Reliable?
Although the ABR suggests buying Perion Network, it is not advisable to make investment decisions solely based on this information. Several studies have shown limited success in using brokerage recommendations to pick stocks with the highest potential for price increase. One reason for this is the strong positive bias that brokerage analysts often have towards the stocks they cover. Research indicates that brokerage firms assign five “Strong Buy” ratings for every “Strong Sell” rating, which suggests that their interests are not always aligned with individual investors. Therefore, it is best to use brokerage recommendations as a validation tool for your own research or to confirm other reliable indicators of a stock’s price movement.
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Using Zacks Rank to Evaluate Perion Network
Zacks Rank is a proprietary stock rating tool that categorizes stocks into five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). It is a reliable indicator of a stock’s performance in the near future. While the ABR is solely based on brokerage recommendations, the Zacks Rank takes into account earnings estimate revisions. Empirical research shows a strong correlation between near-term stock price movements and trends in earnings estimate revisions.
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Difference Between ABR and Zacks Rank
Despite appearing on the same 1 to 5 scale, ABR and Zacks Rank are two distinct measures. The ABR is calculated based on brokerage recommendations, displayed with decimals, and not always up-to-date. In contrast, the Zacks Rank is a quantitative model that incorporates earnings estimate revisions and is represented by whole numbers. While brokerage recommendations may be overly optimistic, the Zacks Rank provides a balanced and timely assessment of a stock’s future performance.
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Is Perion Network a Good Investment?
Looking at the earnings estimate revisions for Perion Network, the Zacks Consensus Estimate for the current year has remained unchanged over the past month at $3.18. The steady views of analysts regarding the company’s earnings prospects, as indicated by the unchanged consensus estimate, suggest that the stock may perform in line with the broader market in the near term. Considering the Buy-equivalent ABR, it is prudent to exercise caution when evaluating Perion Network as an investment.
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While brokerage recommendations can influence stock prices, they should not be the sole basis for investment decisions. It is important to validate these recommendations through thorough research and analysis. The Zacks Rank, which incorporates earnings estimate revisions, can provide a more reliable indicator of a stock’s future performance. Investors should use brokerage recommendations as a supplementary tool rather than relying solely on them.