Wall Street Analysts Think SkyWest (SKYW) Is a Good Investment: Is It?

When deciding whether to buy, sell, or hold a stock, investors often rely on analyst recommendations. Media reports about rating changes by these brokerage-firm-employed (or sell-side) analysts often influence a stock's price, but are they really important?Let's take a look at what these Wall Street heavyweights have to say about SkyWest (SKYW) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.SkyWest currently has an average brokerage recommendation (ABR) of 1.60, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by five brokerage firms. An ABR of 1.60 approximates between Strong Buy and Buy.Of the five recommendations that derive the current ABR, three are Strong Buy and one is Buy. Strong Buy and Buy respectively account for 60% and 20% of all recommendations.Brokerage Recommendation Trends for SKYWCheck price target & stock forecast for SkyWest here>>>While the ABR calls for buying SkyWest, 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.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.With an impressive externally audited track record, our proprietary stock rating tool, the Zacks Rank, which classifies stocks into five groups, ranging 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.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.There is also a key difference between the ABR and Zacks Rank when it comes to freshness. When you look at the ABR, it may not be up-to-date. Nonetheless, since brokerage analysts constantly revise their earnings estimates to reflect changing business trends, and their actions get reflected in the Zacks Rank quickly enough, it is always timely in predicting future stock prices.Should You Invest in SKYW?In terms of earnings estimate revisions for SkyWest, the Zacks Consensus Estimate for the current year has increased 3.6% over the past month to $9.28.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 SkyWest. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>Therefore, the Buy-equivalent ABR for SkyWest may serve as a useful guide for investors.Zacks Names #1 Semiconductor StockIt's only 1/9,000th the size of NVIDIA which skyrocketed more than +800% since we recommended it. NVIDIA is still strong, but our new top chip stock has much more room to boom.With strong earnings growth and an expanding customer base, it's positioned to feed the rampant demand for Artificial Intelligence, Machine Learning, and Internet of Things. Global semiconductor manufacturing is projected to explode from $452 billion in 2021 to $803 billion by 2028.See This Stock Now for Free >>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 SkyWest, Inc. (SKYW): 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