Wall Street Analysts Think Onto Innovation (ONTO) Is a Good Investment: Is It?

Core Viewpoint - Analyst recommendations play a significant role in influencing stock prices, but their reliability is questionable due to potential biases from brokerage firms [1][6]. Brokerage Recommendations - Onto Innovation (ONTO) has an average brokerage recommendation (ABR) of 2.00, indicating a Buy, based on recommendations from nine brokerage firms [2]. - Among the nine recommendations, four are Strong Buy (44.4%) and one is Buy (11.1%) [2]. Limitations of Brokerage Recommendations - Studies indicate limited success of brokerage recommendations in identifying stocks with the best price increase potential [5]. - Analysts from brokerage firms often exhibit a strong positive bias due to vested interests, leading to a disproportionate number of Strong Buy recommendations compared to Strong Sell [6][10]. Zacks Rank vs. ABR - The Zacks Rank, which is based on earnings estimate revisions, is a more reliable indicator of a stock's near-term price performance compared to ABR [8][11]. - Zacks Rank is displayed in whole numbers (1 to 5) and is updated more frequently than ABR, which may not reflect the most current information [9][13]. Current Earnings Estimates for Onto Innovation - The Zacks Consensus Estimate for Onto Innovation's current year earnings has declined by 3.2% over the past month to $4.97, indicating growing pessimism among analysts [14]. - This decline in earnings estimates has resulted in a Zacks Rank of 4 (Sell) for Onto Innovation, suggesting caution despite the Buy-equivalent ABR [15].