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Investors often rely on recommendations from Wall Street analysts when deciding whether to buy, sell or hold a stock. Media reports of changes in the ratings of analysts employed by brokerage firms (or sell-side firms) often affect stock prices. But do they really matter?

Before we discuss the reliability of brokerage recommendations and how to use them to your advantage, let’s take a look at what these Wall Street heavyweights think. Amazon (AMZN).

Amazon currently has an average brokerage recommendation (ABR) of 1.10 on a scale of 1 to 5 (strong buy to strong sell), calculated based on actual recommendations (buy, hold, sell, etc.) made by 50 brokerages firms. An ABR of 1.10 is roughly between a strong buy and a buy.

Of the 50 recommendations from which the current ABR is derived, 46 are Strong Buy and three are Buy. Strong “Buy” and “Buy” calls respectively account for 92% and 6% of all recommendations.

Check Amazon stock price target and forecast here>>>

While ABR calls for buying Amazon, it may be unwise to make an investment decision based solely on this information. Several studies have shown that broker recommendations do little to help investors select stocks with the best potential for price growth.

Are you wondering why? As a result of brokerage firms’ vested interest in the stocks they cover, their analysts tend to rate them with a strong positive bias. According to our research, brokerages assign five Strong Buy recommendations for every Strong Sell recommendation.

In other words, their interests are not always aligned with those of retail investors, and they rarely indicate where the stock price might actually be heading. So, the best use of this information might be to check your own research or an indicator that has proven to be quite successful in predicting stock price movements.

With an impressive, outside-audited track record, our proprietary Zacks Rank stock rating tool, which ranks stocks into five groups ranging from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), is a reliable indicator of stock price performance in the short term. Therefore, confirming a Zacks Rank with ABR can go a long way in making a profitable investment decision.

While both the Zacks Rank and ABR range from 1 to 5, they are completely different metrics.

ABR is calculated solely based on brokerage firm recommendations and is typically displayed in decimals (example: 1.28). In contrast, the Zacks Rank is a quantitative model that allows investors to harness the power of earnings estimate revisions. It is displayed as integers – from 1 to 5.

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