Given Wall Street’s Bullish Views, Is SoundHound AI (SOUN) Worth Investing?

Investors often rely on recommendations from Wall Street analysts before making a buy, sell or hold decision on a stock. While media reports of rating changes by these analysts employed (or selling) at brokerage firms often influence a stock’s price, do they really matter?

Before we discuss the reliability of brokerage recommendations and how you can use them to your advantage, let’s see what these Wall Street heavyweights think SoundHound AI, Inc. (CLAY).

SoundHound AI currently has an average broker recommendation (ABR) of 1.67 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) from six brokerage firms. An ABR of 1.67 is roughly between Strong Buy and Buy.

Of the six recommendations that derive the current ABR, four are Strong Buys, representing 66.7% of all recommendations.

Check the price target and stock forecast for SoundHound AI>>> here

The ABR suggests purchasing SoundHound AI, but making an investment decision based on this information alone may not be a good idea. According to several studies, broker recommendations have little to no success in helping investors select stocks with the greatest potential for price appreciation.

Are you wondering why? Because of brokerage firms’ vested interest in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms give five Strong Buy recommendations for every Strong Sell recommendation.

In other words, their interests don’t always align with those of retail investors and rarely provide any indication of where a stock’s price might actually go. Therefore, the best use of this information might be to validate your own research or an indicator that has proven to be highly successful in predicting a stock’s price movement.

Zacks Rank, our proprietary stock rating tool with an impressive, outside-audited track record of success, categorizes stocks into five groups ranging from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell) and is an effective indicator of a company’s performance Share price development in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way to make a profitable investment decision.

Although the Zacks Rank and ABR both appear on a scale of 1 to 5, they are two completely different measures.

The ABR is calculated exclusively based on broker recommendations and is typically displayed in decimal numbers (example: 1.28). In contrast, the Zacks Rank is a quantitative model that allows investors to harness the power of earnings estimate revisions. The display is in whole numbers – 1 to 5.

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