Don't listen to Analysts
There are a variety of analysts but what is usually meant by this is people who publish stock research and make recommendations. You can break them into two groups.
Sell-Side Analysts.
They typically work at investment banks and their research goes out to promote stocks for purchase, with several goals:
a) So that the investment bank can get business from the management of the stock, either its IPO, secondary offerings, bond financings, etc.
b) Give clients of the investment bank a steady stream of research reports to make them feel like being a client gives them access to special information.
At large brokers, ie Merrill Lynch, the brokers take advantage of the research to buy the stock before the report breaks, then promote it widely and publicly so that the stock has a good day. This is done to show clients that being with the firm and their broker is “working for them” to make a few extra pennies, but that day’s results will have little impact on their long term results.
Sell-side analysts aren’t investors, they are sales people.
Buy-Side Analysts
They work for investment funds. Unlike sell-side Analysts, their incentives are much more aligned with their clients (or firm), and typically their research is much better. But again they aren't investors, and they don't have skin in the game, your losses are yours not theirs. And by the time you hear about their recommendations, their firms have almost certainly purchased or sold based on them, so your price is rarely as good.
Over time the few analysts who are actually skilled at analysis move over to work at investment funds. Those who are terrible at it get jobs at ARKK. Those who stay tend to be the mediocre.
What do they do well?
Research typically shows that on average analyst picks trail the market over time. One reason is their biases, the vast majority of their recommendations are buys because a sell recommendation on a company makes them unpopular with that company.
The one area where they do appear to have an edge is the most useless skill of all, predicting next quarters earnings. This is because they are typically given very strong hints by management to guide their estimates. And the reason this is usually useless is that next quarters results are only a minor part of the total valuation of the business. The value of a business is all its future cash flows for decades to come.
How do you find good ones?
That said there are certainly a small handful of good analysts out there. So how do you find them? Answer for most investors is you can’t. If you aren't expert enough to do your own analysis, you won’t be able to pick the actual expert who can do it well. And in this case, you should stick to buying index funds.
But if you are able to analyze a business and estimate it’s intrinsic value, you still want to be wary of listening to an analyst, esp. at the start of researching a business. You need to start by making your most unbiased and accurate estimates of a businesses strengths, risks and values before you hear ANY other opinions. IE read the 10k at least before you ask for other input or open up an analysts report on the company. Only then will you be armed with the necessary tools to be able to listen to other opinions without being biased. You will know when those opinions aren't based on the facts, or are based on a misinterpretation of the facts, and you will know when they may be valid perspective based on factors that you hadn't yet considered.