Alaska Air (ALK) Is Considered a Good Investment by Brokers: Is That True?

Core Viewpoint - The article discusses the reliability of brokerage recommendations, particularly focusing on Alaska Air Group (ALK), and highlights the importance of using these recommendations in conjunction with other analytical tools like the Zacks Rank to make informed investment decisions [1][5][10]. Brokerage Recommendations - Alaska Air currently has an average brokerage recommendation (ABR) of 1.27, indicating a consensus between Strong Buy and Buy, based on recommendations from 15 brokerage firms, with 13 of those being Strong Buy, representing 86.7% of all recommendations [2][4]. - Despite the positive ABR, the article cautions against making investment decisions solely based on this metric, as studies show limited success of brokerage recommendations in predicting stock price increases [5][10]. Zacks Rank vs. ABR - The Zacks Rank is a proprietary stock rating tool that classifies stocks into five groups, from Zacks Rank 1 (Strong Buy) to Zacks Rank 5 (Strong Sell), and is based on earnings estimate revisions, which have a strong correlation with near-term stock price movements [8][11]. - The Zacks Rank is distinct from the ABR, as it is a quantitative model reflecting timely earnings estimates, while the ABR is based on brokerage recommendations that may not be up-to-date [9][12]. Earnings Estimate Revisions - For Alaska Air, the Zacks Consensus Estimate for the current year has declined by 29.7% over the past month to $3.65, indicating growing pessimism among analysts regarding the company's earnings prospects [13]. - This decline in earnings estimates has resulted in a Zacks Rank 5 (Strong Sell) for Alaska Air, suggesting that the positive ABR should be viewed with caution [14].