Advertisement
Singapore markets close in 6 hours 31 minutes
  • Straits Times Index

    3,177.73
    -39.18 (-1.22%)
     
  • Nikkei

    39,152.60
    -370.95 (-0.94%)
     
  • Hang Seng

    16,551.97
    -169.72 (-1.02%)
     
  • FTSE 100

    7,995.58
    +71.78 (+0.91%)
     
  • Bitcoin USD

    65,275.74
    +1,690.66 (+2.66%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,123.41
    -75.65 (-1.46%)
     
  • Dow

    37,983.24
    -475.86 (-1.24%)
     
  • Nasdaq

    16,175.09
    -267.11 (-1.62%)
     
  • Gold

    2,377.70
    +3.60 (+0.15%)
     
  • Crude Oil

    85.36
    -0.30 (-0.35%)
     
  • 10-Yr Bond

    4.4990
    -0.0770 (-1.68%)
     
  • FTSE Bursa Malaysia

    1,545.71
    -5.33 (-0.34%)
     
  • Jakarta Composite Index

    7,286.88
    +32.48 (+0.45%)
     
  • PSE Index

    6,589.58
    -69.81 (-1.05%)
     

Sea Limited Sponsored ADR (SE) Is Considered a Good Investment by Brokers: Is That True?

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 Sea Limited Sponsored ADR (SE) before we discuss the reliability of brokerage recommendations and how to use them to your advantage.

Sea Limited Sponsored ADR currently has an average brokerage recommendation (ABR) of 1.96, on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell, etc.) made by 12 brokerage firms. An ABR of 1.96 approximates between Strong Buy and Buy.

Of the 12 recommendations that derive the current ABR, five are Strong Buy and two are Buy. Strong Buy and Buy respectively account for 41.7% and 16.7% of all recommendations.

ADVERTISEMENT

Brokerage Recommendation Trends for SE

Broker Rating Breakdown Chart for SE
Broker Rating Breakdown Chart for SE



Check price target & stock forecast for Sea Limited Sponsored ADR here>>>

The ABR suggests buying Sea Limited Sponsored ADR, but making an investment decision solely on the basis of this information might not be a good idea. According to several studies, brokerage recommendations have little to no success guiding investors to choose stocks with the most potential for price appreciation.

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.

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 ABR

In 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.

Analysts employed by brokerage firms have been and continue to be overly optimistic with their recommendations. Since the ratings issued by these analysts are more favorable than their research would support because of the vested interest of their employers, they mislead investors far more often than they guide.

On the other hand, earnings estimate revisions are at the core of the Zacks Rank. And empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements.

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 SE?

In terms of earnings estimate revisions for Sea Limited Sponsored ADR, the Zacks Consensus Estimate for the current year has increased 2.3% over the past month to $2.91.

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 Sea Limited Sponsored ADR. You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Therefore, the Buy-equivalent ABR for Sea Limited Sponsored ADR 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

Sea Limited Sponsored ADR (SE) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research