Wall Street Bulls Look Optimistic About Take-Two (TTWO): Should You Buy?

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on Take-Two Interactive (TTWO), and highlights the potential misalignment of brokerage firms' interests with those of retail investors [1][4]. Group 1: Brokerage Recommendations for Take-Two - Take-Two currently has an average brokerage recommendation (ABR) of 1.25, indicating a consensus between Strong Buy and Buy, based on 24 brokerage firms' recommendations [2]. - Out of the 24 recommendations, 20 are Strong Buy and 2 are Buy, which accounts for 83.3% and 8.3% of all recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Relying solely on brokerage recommendations for investment decisions may not be advisable, as studies indicate they often fail to guide investors effectively towards stocks with high price appreciation potential [4]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, issuing five "Strong Buy" recommendations for every "Strong Sell" [5]. Group 3: Zacks Rank as an Alternative - Zacks Rank is presented as a more reliable tool for stock evaluation, categorizing stocks from Zacks Rank 1 (Strong Buy) to Zacks Rank 5 (Strong Sell), and is based on earnings estimate revisions [7][10]. - The Zacks Rank is timely and reflects the latest earnings estimates, unlike the ABR, which may not be up-to-date [11]. Group 4: Current Earnings Outlook for Take-Two - The Zacks Consensus Estimate for Take-Two's current year earnings has declined by 0.9% over the past month to $2.51, indicating growing pessimism among analysts regarding the company's earnings prospects [12]. - This decline in earnings estimates has resulted in a Zacks Rank 4 (Sell) for Take-Two, suggesting caution despite the Buy-equivalent ABR [13].