Wall Street Analysts See MasterCard (MA) as a Buy: Should You Invest?

Core Viewpoint - The article discusses the reliability of Wall Street analysts' recommendations, particularly focusing on MasterCard (MA), and highlights the differences between average brokerage recommendations (ABR) and Zacks Rank as tools for investors [1][5]. Group 1: Brokerage Recommendations for MasterCard - MasterCard has an average brokerage recommendation (ABR) of 1.47, indicating a position between Strong Buy and Buy, based on recommendations from 38 brokerage firms [2]. - Out of the 38 recommendations, 27 are Strong Buy and 4 are Buy, which account for 71.1% and 10.5% of all recommendations respectively [2]. Group 2: Limitations of Brokerage Recommendations - Solely relying on brokerage recommendations for investment decisions may not be advisable, as studies show they often fail to guide investors effectively towards stocks with high price appreciation potential [5]. - Analysts from brokerage firms tend to exhibit a strong positive bias in their ratings, with five "Strong Buy" recommendations for every "Strong Sell" recommendation, indicating a misalignment of interests between these firms and retail investors [6][10]. Group 3: Zacks Rank as an Alternative - Zacks Rank is presented as a more effective tool for predicting stock price movements, categorizing stocks into five groups based on earnings estimate revisions, which have shown a strong correlation with near-term stock price changes [8][11]. - The Zacks Consensus Estimate for MasterCard has increased by 1.9% over the past month to $16.29, reflecting analysts' growing optimism about the company's earnings prospects [13]. Group 4: Current Investment Outlook for MasterCard - The recent change in the consensus estimate, along with other factors, has resulted in a Zacks Rank 2 (Buy) for MasterCard, suggesting that the Buy-equivalent ABR may serve as a useful guide for investors [14].