Analysts are bullish on Robinhood Markets, but should you trust their recommendations?
New York: When you’re thinking about buying or selling stocks, you often look at what analysts say. Their recommendations can really sway a stock’s price, but how much should you rely on them?
Let’s dive into what Wall Street is saying about Robinhood Markets, Inc. (HOOD) and whether their advice is worth following.
Right now, Robinhood has an average brokerage recommendation of 1.64, which is pretty close to a Strong Buy. This number comes from 18 different brokerage firms, and it shows that most analysts are feeling positive about the stock.
Out of those 18 recommendations, 11 are Strong Buy and 2 are just Buy. That means a good chunk of analysts really believe in Robinhood’s potential.
But here’s the catch: just because analysts are saying to buy doesn’t mean you should jump in without doing your homework. Studies show that these recommendations don’t always lead to the best investment choices.
Why is that? Well, brokerage firms often have a vested interest in the stocks they cover, which can lead to overly optimistic ratings. For every Strong Sell, there are usually five Strong Buys, which can mislead everyday investors.
So, it’s smart to use these recommendations to back up your own research rather than relying on them completely. A tool like the Zacks Rank can help you make better decisions. It’s based on earnings estimate revisions and has a solid track record.
Now, the Zacks Rank and the average brokerage recommendation might look similar since they both use a scale from 1 to 5, but they’re different. The ABR is based on analyst opinions, while the Zacks Rank focuses on actual earnings data.
Analysts tend to be overly positive, which can lead to misleading advice. On the flip side, the Zacks Rank reacts quickly to changes in earnings estimates, making it a more reliable tool for predicting stock movements.
Looking at Robinhood’s earnings estimates, they’ve recently gone up by 11.7%, which is a good sign. Analysts are feeling more optimistic about the company’s future, and that could mean the stock is set to rise.
With all this in mind, the Buy-equivalent ABR for Robinhood could be a helpful guide, but don’t forget to do your own research too.
