Most brokerages employ analysts. (See sell-side analyst for details.) Despite being wrong quite often, these analysts continue to write opinions about stocks and publish financial models. And Wall Street still listens, even though they know their track record. Stock brokerages even pony up money in trading dollars and commissions for these guys—much like your local weather channel continues to pay for the meteorologist who's only right about 30% of the time.
Analyst sponsorship happens when an analyst gives a thumbs-up, positive review of a stock. When that happens, the stock usually goes up. If the sell-side analyst works for a big brokerage like Goldman, he or she can have an especially big impact on a stock. Dolla dolla billz, y'all.
Related or Semi-related Video
Finance: What is Sandbagging?5 Views
Finance a la shmoop what is sandbagging? want Wall Street to love you madam CEO [CEO appears on a balcony]
well what do you do you under promise and you over deliver you conveyed to the
street you'd be thrilled with earning $1 a share next year and when the year is
done you look back and note that you printed $1.30 meaning you actually [Man dazed appears with stack of cash]
earned a dollar 30 what did you do you sandbagged when a flood is imminent
people put bags of sand against the shores of rivers and lakes the idea is [A flooded living room appears]
that the sand absorbs the water and slows the flooding hopefully saving a
few basements along the way when a company sandbags they try to keep
estimates of financials extremely conservative they publish vastly
underwhelming numbers so that when the real numbers come in while the company [Newspaper of company earnings appear]
looks heroic by sandbagging they set the bar low like a two-foot tall hurdle so
that when they successfully leap over those hurdles with tons of clearance [A deer jumping over hurdles]
well they look like gazelles which unfortunately have been banned from
Olympic competition doping who would have guessed?
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