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Who Are the Analysts?

Stock analysts come in two varieties: buy-side and sell-side. Investment bankers, including most full-service brokerages, hire sell-side analysts to research stocks of interest. Originally, brokerages derived most of their income from commissions on stock sales, hence the term, sell-side analysts. These days, investment banking accounts for the lion's share of full-service brokerage income, but the sell-side label is still applied.

Brokerages employ scores of analysts. Each typically covers a specific industry such as semiconductor equipment or restaurants. Analysts write research reports on their industry as a whole, and on specific companies within the industry. The analysts devise sales and earnings forecasts, buy, hold, or sell recommendations, and target prices for companies they follow. They update their forecasts and recommendations after each company's quarterly report is released and at other times as events warrant. Sell-side analysts ratings and reports are widely distributed, and third parties such as First Call, Zacks Research, and Multex tabulate their ratings and estimates and publish them in the form of analysts' consensus ratings and forecasts.


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