Is Uber (UBER) a Buy as Wall Street Analysts Are Bullish?

When deciding whether to buy, sell or hold a stock, investors often rely on the recommendations of Wall Street analysts. Media reports that these analysts employed (or selling) at brokerage firms change their ratings often affect a stock’s price. But are they really important?

Let’s take a look at what these Wall Street heavyweights have to say Uber technologies (UBER) before we discuss the reliability of broker recommendations and how you can use them to your advantage.

Uber currently has an average broker recommendation (ABR) of 1.29 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on actual recommendations (Buy, Hold, Sell, etc.) from 45 brokerage firms. An ABR of 1.29 is roughly between Strong Buy and Buy.

Of the 45 recommendations that derive the current ABR, 37 are Strong Buy and three are Buy. “Strong Buy” and “Buy” account for 82.2% and 6.7% of all recommendations, respectively.

Check the price target and stock forecast for Uber>>> here

While the ABR calls for buying Uber, it may not be wise to make an investment decision based solely on this information. Multiple studies have shown that broker recommendations have limited or no success in selecting stocks with the best price appreciation potential.

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.

With an impressive, outside-audited track record of success, our proprietary Zacks Rank stock ranking tool, which divides stocks into five groups from Zacks Rank #1 (Strong Buy) to Zacks Rank #5 (Strong Sell), is a reliable indicator of a stock’s near-term price performance. So, validating the Zacks Rank with ABR could go a long way in making a profitable investment decision.

Although both the Zacks Rank and ABR are displayed in a range of 1 to 5, they are different measures overall.

Broker recommendations are the only basis for calculating ABR, which is usually shown in decimal numbers (e.g. 1.28). The Zacks Rank, on the other hand, is a quantitative model that is designed to harness the power of earnings estimate revisions. The display is in whole numbers – 1 to 5.

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