Is Trip.com (TCOM) a Buy as Wall Street Analysts Look Optimistic?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Trip.com (TCOM), and highlights the potential misalignment of interests between brokerage analysts and retail investors [1][4][9]. Brokerage Recommendations - Trip.com has an average brokerage recommendation (ABR) of 1.11, indicating a consensus between Strong Buy and Buy, based on 19 brokerage firms' recommendations, with 18 being Strong Buy, representing 94.7% of all recommendations [2][4]. - Despite the favorable ABR, relying solely on this information for investment decisions may not be advisable, as studies suggest brokerage recommendations often fail to guide investors effectively [4][9]. Analyst Bias - Brokerage analysts tend to exhibit a strong positive bias in their ratings due to vested interests, with a ratio of five "Strong Buy" recommendations for every "Strong Sell" [5][9]. - This bias can mislead investors regarding the actual price direction of stocks, suggesting that brokerage recommendations should be used to validate independent research rather than as standalone indicators [6][9]. Zacks Rank Comparison - Zacks Rank, a proprietary stock rating tool, categorizes stocks from 1 (Strong Buy) to 5 (Strong Sell) and is based on earnings estimate revisions, which have shown a strong correlation with near-term stock price movements [7][10]. - The Zacks Rank is distinct from ABR, as it is a quantitative model reflecting timely earnings estimates, while ABR may not always be up-to-date [8][11]. Earnings Estimate Trends - For Trip.com, the Zacks Consensus Estimate for the current year has declined by 8.4% over the past month to $3.44, indicating growing pessimism among analysts regarding the company's earnings prospects [12]. - This decline in earnings estimates has contributed to a Zacks Rank of 4 (Sell) for Trip.com, suggesting caution despite the positive ABR [13].