HomeMost PopularTech StocksWall Street Bulls Look Optimistic About Copa Holdings (CPA): Should You Buy?

Wall Street Bulls Look Optimistic About Copa Holdings (CPA): Should You Buy?

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Many investors rely on the recommendations of Wall Street analysts when deciding whether to buy, sell, or hold a stock. However, there is often skepticism about the impact these recommendations have on a stockโ€™s price. Before we discuss their reliability and how to use them effectively, letโ€™s see what leading Wall Street analysts think about Copa Holdings (CPA).

Currently, Copa Holdings has an average brokerage recommendation (ABR) of 1.00, on a scale of 1 to 5 (Strong Buy to Strong Sell). This ABR is calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 10 brokerage firms. An ABR of 1.00 indicates a Strong Buy recommendation.

Brokerage Recommendation Trends for CPA

Broker Rating Breakdown Chart for CPA

Click here to check the price target and stock forecast for Copa Holdings >>>

While the ABR suggests buying Copa Holdings, itโ€™s important to note that making investment decisions solely based on this information may not be wise. Numerous studies have shown limited success of brokerage recommendations in predicting stocks with the best price increase potential.

One reason for this limited success is the vested interest of brokerage firms in the stocks they cover, which often results in a strong positive bias from their analystsโ€™ ratings. Our research indicates that for every โ€œStrong Sellโ€ recommendation, brokerage firms assign five โ€œStrong Buyโ€ recommendations. This misalignment of interests with retail investors rarely reflects the true direction of a stockโ€™s price. Therefore, it is best to use this information as a validation tool for your own research or in conjunction with other successful indicators of price movement.

With the Zacks Rank, a widely respected and externally audited stock rating tool, investors have a reliable indicator of a stockโ€™s near-term price performance. The Zacks Rank classifies stocks into five groups, from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), based on earnings estimate revisions. By cross-referencing the Zacks Rank with the ABR, investors can make more informed investment decisions.

Zacks Rank Should Not Be Confused With ABR

Although both the Zacks Rank and ABR use a scale of 1-5, they are fundamentally different 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 incorporates earnings estimate revisions. It is displayed in whole numbers, ranging from 1 to 5.

Brokerage analysts have a history of issuing overly optimistic recommendations, often unrelated to their research due to the vested interest of their employers. As a result, they mislead investors more often than they guide them. In contrast, the Zacks Rank is driven by earnings estimate revisions, which have been shown to strongly correlate with short-term stock price movements.

Another difference between the ABR and Zacks Rank is timeliness. The ABR may not always reflect the most up-to-date information, whereas the Zacks Rank quickly incorporates earnings estimate revisions, making it a timely indicator of future price movements.

Is Copa Holdings a Good Investment?

Regarding earnings estimate revisions for Copa Holdings, the Zacks Consensus Estimate for the current year remains unchanged at $14.52 over the past month.

The steady views of analysts regarding the companyโ€™s earnings prospects, as reflected in the unchanged consensus estimate, suggest that the stock may perform in line with the broader market in the near term.

Based on the recent change in the consensus estimate and other factors related to earnings estimates, Copa Holdings currently holds a Zacks Rank #3 (Hold). You can see the complete list of todayโ€™s Zacks Rank #1 (Strong Buy) stocks here >>>>

Considering the Buy-equivalent ABR for Copa Holdings, it may be prudent to exercise caution before making an investment decision.

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