Red Robin (RRGB) Stock: 87.6% Upside Potential and How to Trade Safely and Effectively

Red Robin (RRGB) has been on a roll lately, gaining 57.7% over the past four weeks and closing the last trading session at $5.00. However, there could be plenty of upside left in the stock if short-term price targets set by Wall Street analysts are any guide. The mean price target of $9.38 indicates an 87.6% upside potential, with estimates ranging from a low of $3.50 to a high of $12.00 and a standard deviation of $3.94.

While the consensus price target is highly sought after by investors, the ability and unbiasedness of analysts in setting price targets have long been questionable. And investors making investment decisions solely based on this tool would arguably do themselves a disservice. However, an impressive consensus price target is not the only factor that indicates a potential upside in RRGB.

The agreement among analysts that the company will report better earnings than what they estimated earlier strengthens this view. Though a positive trend in earnings estimate revisions doesn't give any idea as to how much the stock could surge, it has proven effective in predicting an upside. In fact, one estimate has moved higher over the last 30 days compared to no negative revision, resulting in a 7.6% increase in the Zacks Consensus Estimate. Moreover, RRGB currently has a Zacks Rank #2 (Buy), which means it is in the top 20% of more than 4,000 stocks that we rank based on four factors related to earnings estimates.

Therefore, while the consensus price target may not be a reliable indicator of how much RRGB could gain, the direction of price movement it implies does appear to be a good guide. Investors should always treat price targets with a high degree of skepticism and not make investment decisions solely based on them. However, analysts' growing optimism over the company's earnings prospects could be a legitimate reason to expect an upside in the stock.

In conclusion, while investors should not entirely ignore price targets, they should also consider other factors such as earnings estimate revisions and Zacks Rank when making investment decisions. Red Robin (RRGB) appears to be a stock with significant potential upside based on these indicators.

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