New Analyst Coverage Puts the Spotlight on These 5 Stocks

New analyst coverage unearths extensive data on stocks for investors. As analysts are privy to vital information, which is crucial for investment decisions, they are much relied on as lack of information creates chances of misinterpretation (over- or under-valued).

Analysts don’t add a stock to their coverage randomly. New coverage on a stock is usually the result of huge investor focus on it or its promising prospects.

Interestingly, stocks typically see an incremental upward price movement with new analyst coverage compared to what they witness with continuation of existing analyst coverage. Of course, the price movement depends on the recommendations from the new analysts. Positive recommendations — Buy and Strong Buy — lead to a significant positive incremental price reaction than Strong Sell, Sell or Hold recommendations.

Moreover, if an analyst gives a new recommendation on a company that has limited or no analyst coverage, investors start paying more attention to it. Also, any new information attracts portfolio managers to build a position in the stock.

However, one should preferably look for the average change in broker recommendation rather than a single recommendation change. Then again, an upgrade, an initiation or even increased coverage is equally important.

Keeping this mind, it’s a good strategy to focus on the number of analyst recommendations that have increased over the last few weeks.

Below, we have selected five stocks that have seen increased analyst coverage over the last few weeks.

Screening Criteria

Number of Broker Ratings now greater than the Number of Broker Ratings four weeks ago (This will shortlist stocks that have recent new coverage).

Average Broker Rating less than Average Broker Rating four weeks ago ('Less than' means 'better than' four weeks ago).

Increased analyst coverage and improving average rating are the primary criteria of this strategy but one should consider other relevant parameters to make the strategy foolproof.

Here are the other screening parameters:

Price greater than or equal to $5 (as a stock below $5 will not likely create significant interest for most investors).

Average Daily Volume greater than or equal to 100,000 shares (if volume isn’t enough, it will not attract individual investors).

Here are five of 13 stocks that passed the screen:

Stamps.com Inc. STMP: Headquartered in El Segundo, CA, this company provides Internet-based mailing and shipping solutions in the United States and Europe and carries a Zacks Rank #2 (Buy). Although the stock has underperformed the industry over the past six months, earnings estimates have moved up 8% over the past 30 days for 2021, depicting analyst optimism over the company’s earnings growth potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Software, Inc. AMSWA: This Atlanta, GA-based company develops, markets, and supports a range of computer business application software products and services in the United States and internationally. The stock carries a Zacks Rank #3 (Hold) and has gained 46.3% over the past six months, outperforming its industry’s 6.2% growth. Earnings estimates have moved up 22.7% over the past seven days for the current year.

Rambus Inc. RMBS: This Sunnyvale, CA-based company creates innovative hardware and software technologies, driving advancements from the data center to the mobile edge. This Zacks Rank #3 stock has gained 52.6% over the past six months, outperforming the industry’s 31.8% growth. Earnings estimates have moved up 2.5% over the past 30 days for 2021.

Apollo Commercial Real Estate Finance, Inc. ARI: Based in New York, NY, this company operates as a real estate investment trust (REIT). The stock carries a Zacks Rank #3 and has gained 51.7% over the past six months, outperforming its industry’s 28.9% growth. Earnings estimates have moved up 9.1% over the past 30 days for 2021.

Vuzix Corporation VUZI: Headquartered in West Henrietta, NY, this company is a leading supplier of Smart-Glasses and Augmented Reality technologies and products for consumer and enterprise markets. The stock carries a Zacks Rank #3 and has gained 361.5% over the past six months, outperforming its industry’s 50% growth. Loss estimates have narrowed to 36 cents from 43 cents over the past 30 days for 2021.

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Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.

Disclosure: Performance information for Zacks’ portfolios and strategies are available at: https://www.zacks.com/performance

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Rambus, Inc. (RMBS) : Free Stock Analysis Report
 
American Software, Inc. (AMSWA) : Free Stock Analysis Report
 
Vuzix Corporation (VUZI) : Free Stock Analysis Report
 
Apollo Commercial Real Estate Finance (ARI) : Free Stock Analysis Report
 
Stamps.com Inc. (STMP) : Free Stock Analysis Report
 
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