What an analyst rating is
Analysts at firms like banks and brokerages follow a small group of companies closely. They read every filing, listen to earnings calls and build financial models. Then they publish two things: a rating and a price target.
The rating is their recommendation. The price target is where they think the stock will trade in about 12 months.
The rating scale
Firms use different words, but nearly all of them map to five levels.
Strong buy
Also called conviction buy. The analyst expects the stock to do much better than the market.
Buy
Also called outperform or overweight. Expected to beat the market or its sector.
Hold
Also called neutral, market perform or equal weight. Expected to move with the market.
Sell and strong sell
Also called underperform or underweight. Expected to lag the market. These are rare.
Some sites flip the scale so that 1 means strong buy. Always check the legend before reading a score.
Build a consensus
Build a consensus
Add or remove analyst ratings and watch the consensus needle move.
19 analysts
Each rating gets a score from 1 (strong sell) to 5 (strong buy). The consensus is the average.
Price targets
The gap between today's price and the average target is called the implied upside. It's a quick way to see how much room analysts think the stock has.
Price target explorer
Analysts' 12-month targets for Northwind Coffee range from $70 to $125. Move today's price and see the implied upside.
If the average target is right, the stock would gain +19.5% over the next 12 months.
Upgrades and downgrades
A rating change usually moves a stock more than the rating itself. Pick a type to see what it means.
Upgrade. The analyst now thinks the stock will do better than before. Upgrades from well-known firms can move a stock several percent in a day.
Common mistakes
Treating a rating as a guarantee
Analysts are often wrong, especially around big surprises. Use ratings as one input, not a decision.
Taking hold at face value
Fewer than one in ten ratings is a sell, so hold often signals more doubt than it sounds.
Ignoring who wrote it
Analysts have very different track records. One accurate analyst can matter more than five average ones.
Forgetting the timeframe
Price targets are usually 12-month views. They say little about what happens this week.
Ratings on Stockwhiz
Stockwhiz tracks rating changes as they're published and summarises what changed and why.
| Company | Firm | Change | Price target |
|---|---|---|---|
| Northwind Coffee (NWCF) | Example Securities | Upgrade to Buy | $90 to $110 |
| Helio Grid Systems (HLGD) | Sample Capital | Downgrade to Hold | $64 to $52 |
| Brightpath Health (BPTH) | Demo Research | Reiterated Buy | $145 |
Sample rows with made-up companies and firms. Live analyst ratings data coming soon.
Check yourself
A stock trades at $100 and the average analyst price target is $120. What's the implied upside?
Frequently asked questions
They're informed opinions, not predictions you can bank on. They're most useful for understanding what the market already expects.
Many analysts work for brokerage firms that may also do investment banking for the companies they cover, and pay structures can push toward positive ratings. Analysts must disclose these conflicts in their research reports, so it's worth reading the disclosures.
Often, yes, especially from large, well-followed firms. The move can fade within days if nothing else changes.
Usually after earnings, big news or a change in the analyst's model. Stockwhiz shows each change as it's published.
Related terms
Sources and further reading
This guide was written using the following references. The 1 to 5 consensus scoring in the lab is a common convention, and data sites calculate consensus in slightly different ways.
Stockwhiz Learn is for education only and isn't investment advice. Examples use made-up companies unless marked as live data.