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Zacks.com featured highlights Mercer International, Blucora, Universal Technical Institute, Hilton Grand Vacations and Kura Sushi
Zacks Equity Research
8 min read

In This Article:

For Immediate Release

Chicago, IL – July 20, 2022 – Stocks in this week’s article are Mercer International Inc. MERC, Blucora, Inc. BCOR, Universal Technical Institute, Inc. UTI, Hilton Grand Vacations Inc. HGV and Kura Sushi USA, Inc. KRUS.

5 Stocks to Keep an Eye On as Analysts Initiate Coverage

Investors have immense faith in the research work of analysts as they fear that misinterpretations while researching on their own might trigger inefficiencies. Here, analysts play a vital intermediary role with their extensive access to relevant data.

Mercer International Inc., Blucora, Inc., Universal Technical Institute, Inc., Hilton Grand Vacations Inc. and Kura Sushi USA, Inc. are some stocks that have seen new analyst coverage lately. These, therefore, are expected to attract investor attention.

Coverage initiation of a stock by analyst(s) usually portrays higher investor inclination. Investors, on their part, often assume there is something special in a stock to attract analysts to cover it. In other words, they believe that the company coming under the microscope definitely has some value.

Obviously, stocks are not randomly chosen to cover. New coverage on a stock usually reflects a reassuring future envisioned by the analyst(s). At times, increased investors' focus on a stock motivates analysts to take a closer look at it. After all, who doesn't love to produce something that is already in demand? Hence, we often find that analysts' ratings on newly-added stocks are more favorable than their ratings on continuously covered stocks.

It is needless to say, the average change in broker recommendation is preferred over a single recommendation change.

How Does Analyst Coverage Influence Stock Price?

The price movement of a stock is generally a function of the recommendations on it from new analysts. Stocks typically see an upward price movement with a new analyst coverage compared to what they witness with a rating upgrade under an existing coverage. Positive recommendations — Buy and Strong Buy — generally lead to a significantly more positive price reaction than Hold recommendations. On the contrary, analysts hardly initiate coverage with a Strong Sell or Sell recommendation.

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

So, it's a good strategy to bet on stocks that have seen increased analyst coverage over the last few weeks.

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