Investors flock to Wall Street’s analysts for advice, hoping to make a savvy decision on whether to buy, sell, or hold a stock. The financial media often sensationalizes analysts’ ratings, but do these opinions really hold water?
Before delving into the reliability of Wall Street’s opinions and how to use them to your benefit, let’s take a look at what these market movers think about Nu Holdings Ltd. (NU).
The Analysts’ Take on NU
Nu Holdings Ltd. currently boasts an average brokerage recommendation (ABR) of 1.75, reflecting the aggregated suggestions from 10 brokerage firms. This ABR approximates between a Strong Buy and Buy, with 60% of recommendations leaning towards a Strong Buy.
Brokerage Recommendation Trends for NU
The ABR seems to nudge towards a bullish stance on Nu Holdings Ltd. However, banking solely on this data could be a risky move. Research suggests that brokerage recommendations have minimal success in pinpointing stocks with the highest potential for price appreciation.
Why this skepticism? The analysts working at brokerage firms often exhibit an unduly positive bias towards the stocks they cover, resulting in an imbalance in their recommendations. In fact, for every “Strong Sell” recommendation, there are a whopping five “Strong Buy” suggestions.
Given this, it’s clear that the interests of brokerage firms don’t always align with individual investors, rendering their ratings less reliable indicators of a stock’s future price movement.
Enter the Zacks Rank
Enter the Zacks Rank, our trusty proprietary stock rating tool, which categorizes stocks based on five groups, ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell). This tool offers a dependable gauge of a stock’s short-term price performance, holding a track record verified by external audits.
Zacks Rank Should Not Be Confused With ABR
Although both ABR and Zacks Rank are measured on a scale from 1 to 5, they are fundamentally distinctive metrics.
The ABR is solely influenced by brokerage recommendations and is often displayed with decimals, such as 1.28. On the other hand, the Zacks Rank uses a quantitative model driven by earnings estimate revisions, denoted by whole numbers from 1 to 5.
Analysts at brokerage firms have a track record of being excessively upbeat with their recommendations due to their firms’ vested interests, often leading to misleading ratings. In contrast, the Zacks Rank draws its strength from earnings estimate revisions, which have a robust correlation with short-term stock price movements, supported by empirical data.
The Earnings Picture for NU Holdings Ltd.
Examining Nu Holdings Ltd.’s earnings estimate revisions, the Zacks Consensus Estimate for the current year has mounted by 4.8% over the past month to $0.22.
Analysts’ growing confidence in the company’s earnings outlook, showcased by a consensus in boosting EPS estimates, presents valid grounds for the stock to surge in the near future.
Considering the substantial change in the consensus estimate, alongside other factors tied to earnings estimates, Nu Holdings Ltd. recently clinched a Zacks Rank #2 (Buy). You can view the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>
Therefore, the Buy-equivalent ABR for Nu Holdings Ltd. may serve as a useful guide for investors.
Zacks Names “Single Best Pick to Double”
Out of numerous stocks, 5 Zacks experts have singled out their top picks, each projected to ascend +100% or more in the coming months. From these 5, Director of Research Sheraz Mian has identified one with the most explosive potential.
This stock has been lauded for a “watershed medical breakthrough” and is forging a robust pipeline of additional projects that could revolutionize treatments for liver, lung, and blood diseases. This presents an opportune investment poised to ascend from its bear market lows.
It stands to rival or surpass recent doubling stocks like Boston Beer Company, which soared +143.0% in just over 9 months, and NVIDIA, which surged +175.9% in a single year.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.