Definition of Strong Buy Rating

What is a "strong buy rating"? What does it mean if a broker issues a strong buy rating on a stock?

As you can probably figure out, a "strong buy" is the best possible rating that an analyst can bestow upon a company.

The "strong buy" rating isn't as popular as it was a few years ago, as many investment banks prefer to stick with the less ebullient "buy" rating.

A "strong buy" rating means that the covering analyst believes that the stock will trade drastically higher over the coming months. The analyst is usually of the opinion that the stock is set to gain due to some positive event, such as a return to profitability or due to the launch of an exciting new product.

A stock with a "strong buy" rating is expected to significantly outperform the markets over the near-term.

When issuing a strong buy rating, analysts will usually also place an extremely optimistic price target on the stock, such as a 30-50% gain over the coming 12 months.

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