Is PDD Holdings Inc. Sponsored ADR (PDD) a Buy as Wall Street Analysts Look Optimistic?

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 PDD Holdings Inc. Sponsored ADR (PDD) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.PDD Holdings Inc. Sponsored ADR currently has an average brokerage recommendation (ABR) of 1.74, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 19 brokerage firms. An ABR of 1.74 approximates between Strong Buy and Buy.Of the 19 recommendations that derive the current ABR, 12 are Strong Buy, representing 63.2% of all recommendations.Brokerage Recommendation Trends for PDDCheck price target & stock forecast for PDD Holdings Inc. Sponsored ADR here>>>While the ABR calls for buying PDD Holdings Inc. Sponsored ADR, 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.Are you wondering why? The vested interest of brokerage firms in a stock they cover often results in a strong positive bias of their analysts in rating it. Our research shows that for every "Strong Sell" recommendation, brokerage firms assign five "Strong Buy" recommendations.In other words, their interests aren't always aligned with retail investors, rarely indicating where the price of a stock could actually be heading. Therefore, the best use of this information could be validating 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 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.Zacks Rank Should Not Be Confused With ABRIn spite of the fact that Zacks Rank and ABR both appear on a scale from 1 to 5, they are two completely different measures.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.Furthermore, the different grades of the Zacks Rank are applied proportionately across all stocks for which brokerage analysts provide earnings estimates for the current year. In other words, at all times, this tool maintains a balance among the five ranks it assigns.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.Is PDD a Good Investment?In terms of earnings estimate revisions for PDD Holdings Inc. Sponsored ADR, the Zacks Consensus Estimate for the current year has increased 14.7% over the past month to $9.62.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 #1 (Strong Buy) for PDD Holdings Inc. Sponsored ADR. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>Therefore, the Buy-equivalent ABR for PDD Holdings Inc Sponsored ADR may serve as a useful guide for investors.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. 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Sponsored ADR (PDD): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks