What Are Analyst Ratings? Definition and Example
What “buy”, “outperform” and “overweight” actually mean, why most ratings are buys, and how to read one without being misled.
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What Is an Overweight Rating? Definition and Example
What “overweight”, “equal-weight” and “underweight” mean in analyst research, and how big banks’ rating scales line up with buy, hold and sell.
Key takeaways
- An overweight rating means the analyst expects the stock to beat the average return of a reference group, usually the other stocks they cover, over the forecast horizon.
- For regulatory disclosure, overweight counts as a buy, equal-weight as a hold and underweight as a sell.
- The term comes from portfolio weights: hold more of the stock than its benchmark weight.
- Because it is relative, an overweight stock can still lose money if its whole sector falls.
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What does “overweight” mean?
Overweight is the top tier of a three-step scale used by banks such as Morgan Stanley and J.P. Morgan. In J.P. Morgan’s published definitions (2014 SEC filing), overweight means the analyst expects the stock to beat the average total return of the stocks in their coverage universe over the next six to twelve months.
Rating scales by bank
| Firm | Top | Middle | Bottom |
|---|---|---|---|
| Morgan Stanley | Overweight | Equal-weight | Underweight |
| J.P. Morgan | Overweight | Neutral | Underweight |
Other firms use other words for the same three tiers, such as Buy, Neutral and Sell, or Outperform, Market Perform and Underperform. Firms change their scales from time to time; every research report must define its ratings, so check the current disclosure. Morgan Stanley’s research disclosures state that it maps Overweight to buy, Equal-weight to hold and Underweight to sell for regulatory purposes.
Example
Illustrative: an analyst covers ten software stocks and rates one overweight. If the group returns 10% over the year and that stock returns 14%, the call worked. If the group falls 20% and the stock falls 12%, it also “worked” relative to the group, even though you lost money. That is the key difference from an absolute buy.
Why it matters
Data sites fold every label into buy, hold or sell, which hides whether the view was relative or absolute. When an upgrade or downgrade moves a stock, read the firm’s scale first (see analyst upgrades explained), then the price target and the analyst’s record on the analyst rankings.
Common mistakes
- Reading overweight as “this will go up”: it means “better than the group”.
- Treating equal-weight as a positive: in practice it is the hold tier.
- Assuming every bank uses the same reference group or horizon.
See analysts’ ratings on your stocks with Exent
- Stocks Radar ranks thousands of Wall Street analysts by past accuracy and shows their ratings and price targets on each stock.
- Gems flag stocks where several of the best‑rated analysts agree.
Frequently asked questions
Neither is better; they are different firms’ names for their top tier. Overweight is defined relative to a group of stocks, while some buy ratings are absolute.
Equal-weight is the middle tier: the analyst expects the stock to perform roughly in line with its reference group. It counts as a hold.
Underweight is the bottom tier: the analyst expects the stock to trail its reference group. For disclosure purposes it counts as a sell.
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Educational content, not investment advice. Examples are illustrative; past performance does not guarantee future results.