Onto Innovation (ONTO) Is Considered a Good Investment by Brokers: Is That True?

Core Viewpoint - The average brokerage recommendation (ABR) for Onto Innovation (ONTO) is 1.88, indicating a consensus between Strong Buy and Buy, based on recommendations from eight brokerage firms [2]. Brokerage Recommendations - The current ABR of 1.88 is derived from four Strong Buy and one Buy recommendations, which account for 50% and 12.5% of all recommendations respectively [2]. - Despite the positive ABR, reliance solely on brokerage recommendations for investment decisions may not be prudent, as studies indicate limited success in guiding investors towards stocks with the best price increase potential [5]. Analyst Bias and Reliability - Brokerage analysts often exhibit a strong positive bias in their ratings due to vested interests, with research showing that for every "Strong Sell" recommendation, there are five "Strong Buy" recommendations [6]. - This misalignment of interests suggests that brokerage recommendations may not provide reliable insights into future stock price movements [7]. 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 a strong correlation with near-term stock price movements [8][11]. - The Zacks Rank is more timely and reflects current business trends, unlike the ABR, which may not be up-to-date [12]. Current Earnings Estimates for Onto Innovation - The Zacks Consensus Estimate for Onto Innovation has declined by 3.4% over the past month to $5.14, indicating growing pessimism among analysts regarding the company's earnings prospects [13]. - This decline in earnings estimates has resulted in a Zacks Rank of 4 (Sell) for Onto Innovation, suggesting caution despite the Buy-equivalent ABR [14].