Analysts are optimistic about Commvault, but should investors trust their ratings?
New York: So, you’ve probably heard that Wall Street analysts think Commvault (CVLT) is a solid investment. But is it really? Investors often look to these analysts for guidance before deciding to buy or sell stocks. However, the real question is whether their recommendations are worth following.
Commvault has an average brokerage recommendation of 2.00, which suggests a “Buy.” This rating comes from eight different brokerage firms, and half of those are actually saying “Strong Buy.” Sounds good, right? But hold on a second.
Even though the ratings look promising, it’s not always smart to base your investment decisions solely on these recommendations. Studies show that brokerage recommendations don’t always lead to the best stock picks. Why? Well, analysts often have a bias because of their firms’ interests, which can skew their ratings.
For instance, brokerage firms tend to give five “Strong Buy” ratings for every “Strong Sell.” This means their interests might not align with yours as a retail investor. So, it’s better to use these ratings to back up your own research rather than relying on them completely.
One tool that could help is the Zacks Rank, which categorizes stocks based on earnings estimate revisions. This method has a solid track record for predicting stock performance. So, if you’re looking at Commvault, it might be wise to check how it ranks on Zacks alongside the brokerage recommendations.
Now, about Commvault’s earnings: the Zacks Consensus Estimate for this year has actually dropped by 0.2% recently. This decline in estimates could signal trouble ahead for the stock. With a Zacks Rank of #4 (Sell), it’s clear that analysts are feeling less optimistic about Commvault’s earnings potential.
So, while the average brokerage recommendation suggests buying, it’s probably a good idea to take that with a grain of salt. Always do your homework before jumping into any investment!
