Is Alphabet (GOOGL) a Buy as Wall Street Analysts Look Optimistic?
The recommendations of Wall Street analysts are often relied on by investors when deciding whether to buy, sell, or hold a stock. Media reports about these brokerage-firm-employed (or sell-side) analysts changing their ratings often affect a stock's price. Do they really matter, though?
Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let's see what these Wall Street heavyweights think about Alphabet (GOOGL).
Alphabet currently has an average brokerage recommendation (ABR) of 1.22, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 34 brokerage firms. An ABR of 1.22 approximates between Strong Buy and Buy.
Of the 34 recommendations that derive the current ABR, 28 are Strong Buy and four are Buy. Strong Buy and Buy respectively account for 82.4% and 11.8% of all recommendations.
Brokerage Recommendation Trends for GOOGL
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The ABR suggests buying Alphabet, but making an investment decision solely on the basis of this information might not be a good idea. According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.