Investors should show their appreciation for this improving business trend by pushing the stock higher. Their transaction of large amounts of shares then leads to price movement for the stock.įundamentally speaking, rising earnings estimates and the consequent rating upgrade for Monster Beverage imply an improvement in the company's underlying business. An increase or decrease in earnings estimates in their valuation models simply results in higher or lower fair value for a stock, and institutional investors typically buy or sell it. The influence of institutional investors has a partial contribution to this relationship, as these big professionals use earnings and earnings estimates to calculate the fair value of a company's shares. The change in a company's future earnings potential, as reflected in earnings estimate revisions, and the near-term price movement of its stock are proven to be strongly correlated. Most Powerful Force Impacting Stock Prices Therefore, the Zacks rating upgrade for Monster Beverage basically reflects positivity about its earnings outlook that could translate into buying pressure and an increase in its stock price. They may find it difficult to make decisions based on rating upgrades by Wall Street analysts, as these are mostly driven by subjective factors that are hard to see and measure in real time.
Since a changing earnings picture is a powerful factor influencing near-term stock price movements, the Zacks rating system is very useful for individual investors. The Zacks Consensus Estimate - the consensus of EPS estimates from the sell-side analysts covering the stock - for the current and following years is tracked by the system.
The sole determinant of the Zacks rating is a company's changing earnings picture. This rating change essentially reflects an upward trend in earnings estimates - one of the most powerful forces impacting stock prices. Monster Beverage ( MNST Quick Quote MNST - Free Report) appears an attractive pick, as it has been recently upgraded to a Zacks Rank #2 (Buy).
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