GOEV – Zion Tech Group

Investors often turn to recommendations made by Wall Street analysts before making a Buy, Sell, or Hold decision about a stock. While media reports about rating changes by these brokerage-firm employed (or sell-side) analysts often affect a stock’s price, do they really matter?

Let’s take a look at what these Wall Street heavyweights have to say about Canoo Inc. (GOEV) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.

Canoo currently has an average brokerage recommendation (ABR) of 1.86, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by seven brokerage firms. An ABR of 1.86 approximates between Strong Buy and Buy.

Of the seven recommendations that derive the current ABR, four are Strong Buy, representing 57.1% of all recommendations.

Check price target & stock forecast for Canoo here>>>

While the ABR calls for buying Canoo, it may not be wise to make an investment decision solely based on this information. Several studies have shown limited to no success of brokerage recommendations in guiding investors to pick stocks with the best price increase potential.

Do you wonder why? As a result of the vested interest of brokerage firms in a stock they cover, their analysts tend to rate it with a strong positive bias. According to our research, brokerage firms assign five “Strong Buy” recommendations for every “Strong Sell” recommendation.

This means that the interests of these institutions are not always aligned with those of retail investors, giving little insight into the direction of a stock’s future price movement. It would therefore be best to use this information to validate your own analysis or a tool that has proven to be highly effective at predicting stock price movements.

Zacks Rank, our proprietary stock rating tool with an impressive externally audited track record, 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 stock’s price performance in the near future. Therefore, using the ABR to validate the Zacks Rank could be an efficient way of making a profitable investment decision.

Although both Zacks Rank and ABR are displayed in a range of 1-5, they are different measures altogether.

Broker recommendations are the sole basis for calculating the ABR, which is typically displayed in decimals (such as 1.28). The Zacks Rank, on the other hand, is a quantitative model designed to harness the power of earnings estimate revisions. It is displayed in whole numbers — 1 to 5.

It has been and continues to be the case that analysts employed by brokerage firms are overly optimistic with their recommendations. Because of their employers’ vested interests, these analysts issue more favorable ratings than their research would support, misguiding investors far more often than helping them.

In contrast, the Zacks Rank is driven by earnings estimate revisions. And near-term stock price movements are strongly correlated with trends in earnings estimate revisions, according to empirical research.

In addition, the different Zacks Rank grades are applied proportionately to all stocks for which brokerage analysts provide current-year earnings estimates. In other words, this tool always maintains a balance among its five ranks.

Another key difference between the ABR and Zacks Rank is freshness. The ABR is not necessarily up-to-date when you look at it. But, since brokerage analysts keep revising their earnings estimates to account for a company’s changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in indicating future price movements.

In terms of earnings estimate revisions for Canoo, the Zacks Consensus Estimate for the current year has increased 6.9% over the past month to -$47.53.

Analysts’ growing optimism over the company’s earnings prospects, as indicated by strong agreement among them in revising EPS estimates higher, could be a legitimate reason for the stock to soar in the near term.

The size of the recent change in the consensus estimate, along with three other factors related to earnings estimates, has resulted in a Zacks Rank #2 (Buy) for Canoo. You can see the complete list of today’s Zacks Rank #1 (Strong Buy) stocks here >>>>

Therefore, the Buy-equivalent ABR for Canoo may serve as a useful guide for investors.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Canoo Inc. (GOEV) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research

Canoo (GOEV) has been making waves in the electric vehicle (EV) industry, with its unique subscription-based model and innovative designs. As Wall Street analysts begin to take notice of the company’s potential, many are becoming increasingly optimistic about its future prospects.

Analysts at several major investment firms have recently issued positive ratings and price targets for Canoo, highlighting its disruptive business model and strong growth potential. Some analysts believe that Canoo’s subscription-based approach could revolutionize the way consumers think about car ownership, making it a compelling investment opportunity.

However, it is important for investors to exercise caution when considering buying shares of Canoo. Like many EV startups, the company faces significant challenges as it works to scale up production and establish itself in a competitive market. Additionally, the EV industry is highly volatile, and Canoo’s stock price could be subject to sharp fluctuations in the coming months.

Overall, while Wall Street analysts are generally optimistic about Canoo’s prospects, it is important for investors to do their own research and carefully consider the risks before making a decision to buy the stock. With that being said, Canoo’s innovative approach and potential for growth make it a stock worth keeping an eye on in the EV space.

Tags:

Canoo stock analysis, GOEV stock forecast, Wall Street analysts, Canoo investment opportunities, GOEV stock news, Canoo stock price, Wall Street analyst predictions, GOEV stock analysis, Canoo stock outlook

#Canoo #GOEV #Buy #Wall #Street #Analysts #Optimistic

Tag: GOEV

Is Canoo (GOEV) a Buy as Wall Street Analysts Look Optimistic?