Recom
Analyst recommendation
What is Recom (Analyst Recommendation)?
Recom (Analyst Recommendation) is the average score of investment opinions that stock brokerage analysts have given on a particular stock. It is usually shown as a number between 1.0 and 5.0 — the closer to 1.0, the stronger the Buy (Strong Buy), and the closer to 5.0, the stronger the Sell (Strong Sell). To put it simply, it is like averaging the restaurant ratings from several professional food critics. The combined opinion of many experts is more useful than the opinion of just one person.
Key Terms (Korean–English)
Recom = Analyst Recommendation (Analyst Recommendation)
Strong Buy = Strong Buy (1.0)
Buy = Buy (2.0)
Hold = Hold (3.0)
Sell = Sell (4.0)
Strong Sell = Strong Sell (5.0)
Consensus = Consensus (Combined Analyst Opinion)
Why should you look at Recom?
Wall Street analysts are professionals who research companies in depth. They carefully analyze financial statements, talk directly with management, and study industry trends closely. Their combined opinion, the Recom, is a useful reference that shows at a glance how a group of experts views a particular company.
For example, if Nvidia (NVDA) has a Recom of 1.3, it means most analysts rate it a Strong Buy. If a small-cap stock has a Recom of 4.2, most analysts rate it a Sell. However, analyst opinions carry a built-in bias (Buy ratings are far more common than Sell ratings), so it is important to understand and use this in context.
How to Interpret Recom Ratings
1.0 ~ 1.5: Strong Buy
Almost all analysts recommend buying. The company's growth outlook, valuation, and competitiveness are seen very positively. However, this often means the company is already well known and much of the good news may already be priced into the stock.
1.5 ~ 2.5: Buy
Most analysts have a positive view, and the average Recom of S&P 500 large-cap stocks is roughly in this range. Buy opinions dominate, but some Hold or Sell opinions also exist.
2.5 ~ 3.5: Hold
Analyst opinions are split. Buy and Sell opinions are mixed, and the prevailing view is that further upside from the current price is limited. Holding the stock is fine, but you should be cautious about buying it new.
3.5 ~ 5.0: Sell / Strong Sell
Sell opinions are very rare on Wall Street (less than about 5% of all ratings). A Recom in this range is a strong warning that the company has serious problems. However, for contrarian investors, an overly pessimistic view may already be priced in, and the stock could be undervalued.
Related Indicators
Target Price
This is the 12-month price target analysts set alongside the Recom. Stocks with a large Upside (the gap between target price and current price) are attractive. A stock with a Buy Recom and more than 20% Upside to the target price is a strong buy signal.
EPS Estimate
Analysts' future EPS estimates form the basis of the Recom. When EPS estimates are revised upward, the Recom tends to improve; when EPS estimates are cut, the Recom tends to worsen.
Rating Change Trends
The direction of change in Recom can be more important than the absolute number. If it improved from 2.5 last month to 2.0 this month, that is positive momentum; if it worsened from 1.5 to 2.5, that is negative momentum. Rating changes (upgrades/downgrades) have an immediate impact on the stock price.
Practical Strategies
Strategy 1: Track Consensus Upgrade Momentum
Look for stocks whose Recom has improved (the number has gotten lower) over the past three months. When several analysts upgrade their opinion at the same time, it is a strong signal that positive change is happening at the company. Stocks that get upgraded from Hold to Buy, or from Buy to Strong Buy, tend to have especially strong upward price momentum.
Strategy 2: Analyze Stocks with Big Disagreements
If a stock has both Strong Buy and Sell opinions at the same time, it means market experts themselves are divided about the company's future. Tesla (TSLA) is a typical example: some analysts rate it a Strong Buy, while others rate it a Sell. These stocks tend to be volatile, but if you can dig deep and figure out which side is right, they can offer big profit opportunities.
Strategy 3: Contrarian Investing
Stocks that every analyst rates a Buy may already have all the good news priced in, leaving limited room to go higher. On the other hand, among stocks that mostly get Hold ratings, a company whose fundamentals are starting to improve can see a big jump in price when analysts finally catch up and upgrade their opinion.
Cautions
1. Buy-side Bias: Wall Street analysts are structurally biased toward issuing Buy ratings. This is because brokerages often trade the stock or do investment banking business with the company. Even a Recom of 3.0 (Hold) is often interpreted in practice as closer to a Sell opinion.
2. Lagging Nature: Analyst opinions reflect changes that have already happened, so the information may already be baked into the stock price. Rating changes do affect prices, but Recom has limits as a leading indicator.
3. Check the Number of Analysts Covering the Stock: A Recom from a small-cap stock with only 2–3 analysts covering it is not as reliable as a Recom from a large-cap stock with 30+ analysts. The more analysts covering a stock, the more reliable the consensus.
4. Don't Follow Blindly: Even if Recom is Strong Buy, you should make decisions based on your own investment philosophy and analysis. Right before the 2008 financial crisis, many financial stocks still carried Buy ratings.
Checklist: What to Check When Using Recom
1. Check the current Recom score and its meaning (1 = Strong Buy ~ 5 = Strong Sell)
2. Check the number of analysts covering the stock (the more, the more reliable)
3. Check the direction of Recom change over the past 3 months (upward/downward)
4. Check the gap between the Target Price and the current price
5. Check the distribution of Buy / Hold / Sell opinions
6. Check recent news about rating changes (upgrades/downgrades)
7. Judge the stock holistically together with other fundamental indicators
Frequently Asked Questions (FAQ)
Q. If Recom is 1.0 (Strong Buy), should I buy without question?
A. No. Even with a Strong Buy, the positive outlook may already be fully reflected in the stock price. Also, given the Buy-side bias of analysts, Strong Buy means "this is a good company," not "buy it right now." You should make your final decision based on your own buy price target, investment horizon, and risk tolerance.
Q. What happens to the stock price when analysts suddenly change their opinion?
A. When analysts at well-known brokerages (Goldman Sachs, JPMorgan, Morgan Stanley, etc.) change their rating, the stock price is affected immediately. Upgrades (Buy → Strong Buy, Hold → Buy) push the price up, while downgrades (Buy → Hold, Hold → Sell) push the price down. Rating changes announced in the pre-market in the U.S. are reflected right at the open.
Q. Are there stocks that no analysts cover?
A. Yes. Many small-cap stocks or recent IPOs have no analyst coverage yet. For these stocks there is no Recom data, so you have to use other methods of analysis. On the other hand, when coverage begins (an Initiation), new interest and liquidity flow in, which can be positive for the stock price.
Q. Can I read U.S. analyst reports in Korean?
A. Some Korean brokerages offer Korean-language research reports on major U.S. companies. Financial news sites also cover major Wall Street rating changes in Korean. The original reports are mostly in English, and ordinary investors can use platforms such as Seeking Alpha or TipRanks. You can also check Recom scores for each stock on USStockToday.
Notes for Korean Investors
Differences from Korean Brokerage Research: Korean brokerage analysts also have a Buy-side bias, just like in the U.S., but the depth of analysis and the breadth of coverage on Wall Street are world-class. Large-cap U.S. stocks are covered by 30–40 analysts, so the consensus is highly reliable.
Using the Time Difference: U.S. analyst rating changes are often released in the U.S. pre-market before the open. In Korean time, this is usually evening to night, so Korean investors have time to check the news and act before the U.S. market opens.
Use TipRanks: TipRanks is a website that tracks the past performance of individual analysts. Even with the same Buy rating, an opinion from an analyst with a strong track record should carry more weight than one from a less accurate analyst. You can check basic information for free, so it is worth using.
The Importance of Independent Judgment: Analyst opinions are just a reference, and your final investment decision should be based on your own analysis. There have been many cases throughout financial crises where analyst consensus was badly wrong, so following it blindly is risky.