Equity research is mainly produced by what is known as the sell side. The sell side includes investment banks (Goldman Sachs, JP Morgan, BNP Paribas, etc.) and brokers (Kepler Cheuvreux, Baader, Oddo BHF...). Their business consists of selling services to investors: order execution, market access, and research. Sell-side analysts track companies, build financial models, publish notes, and meet with investor clients to discuss their analyses. In the press, they are generally referred to as analysts, brokers, or research houses.

On the other side is the buy side. These are the investors themselves: asset management companies, pension funds, insurers and hedge funds. Their role is to buy securities on behalf of their clients. They also perform analysis, sometimes very in-depth, but their work remains internal. A buy-side manager may have a radically different opinion from the sell side without ever publishing it. Note that what the buy side purchases is not research in the strictest sense, but everything that goes with it: the pitch from the equity salesperson (research sales) who provides ideas, access to the analyst (regular calls), and access to the company via conferences (Corporate Access).

To give an idea of scale, there are approximately 5,000 equity analysts worldwide: it remains a small world. However, there is no truly official list or even a formal definition. In practice, an analyst is recognized when a company includes them on its analyst coverage page or when Bloomberg agrees to display their recommendations on its platform.

Between the two, there are also "independent" players. These are research firms that are not attached to an investment bank and do not engage in brokerage. They only sell their analyses. Their commercial argument is based precisely on the absence of conflicts of interest related to financing or advisory activities. In practice, their economic independence nevertheless depends on their clients and their ability to sell subscriptions.

The production and impact of recommendations

When a sell-side analyst publishes a "Buy" recommendation, it does not mean the company is admirable or virtuous. It means that, according to their model and assumptions, that the stock offers upside potential deemed attractive compared to the current price. The analyst projects future results, estimates margins, chooses a discount rate, and compares multiples with those of the sector. From this, they derive a theoretical value. If this value is significantly higher than the market price, the recommendation will be positive. If the potential seems limited, it will be neutral. If the stock appears overvalued, it will become negative.

This work is based on assumptions. Two analysts can analyze the same company and reach different conclusions. Growth expectations are not certainties. Future margins can surprise. The cost of capital can evolve. Equity research gives an appearance of numerical precision to an exercise that remains fundamentally forward-looking.

Why do these notes influence prices? Because markets are governed by expectations. A revision of earnings forecasts can change the global consensus. The consensus is the average of sell-side analysts' estimates. Many investors monitor this aggregate. If expectations rise, valuation may follow. If they fall, the market may penalize the stock. Furthermore, some funds have internal processes that lead them to reduce a position after a significant downgrade or to strengthen a position when several analysts raise their targets. Obviously, a company like Nvidia, which is followed by 50 analysts, will behave differently than a stock followed by only 1 or 2 analysts, so the influence of analysts should (sometimes) be taken with a grain of salt.

The issue of conflicts of interest is inevitable. Large sell-side banks also engage in mergers and acquisitions advisory or initial public offerings. They maintain commercial relations with the companies they cover. Organizational barriers exist between research teams and investment banking teams, and transparency rules have been strengthened following various crises. Nevertheless, "buy" recommendations are structurally much more numerous than "sell" recommendations. The statistics speak for themselves: about 50% buy ratings, 40% neutral, and only 10% sell. Being consistently negative about a potential client is rarely comfortable.

Who pays for what?

Before 2018, equity research was most often bundled with brokerage commissions in Europe. In other words, a manager did not pay explicitly to receive analyst notes: these were integrated (bundled) with order execution. The more a fund traded through a bank, the more it benefited from access to its research. The cost of analysis was therefore diluted in transaction fees, without a separate billing line.

Since the MiFID II regulation came into force in 2018, research must be billed separately from brokerage commissions in Europe. This reform made the price of analysis visible and debatable. Asset management companies had to make choices: which teams to follow, which brokers to keep, and which coverage to deem truly useful. Budgets were reduced, providers were selected more strictly, and research concentrated around players capable of demonstrating real added value. It should be noted that in the United States, where MiFID II does not apply, financing research through brokerage commissions remains permitted under certain conditions, even if practices have evolved since 2018.

However, the tide seems to be turning. MiFID II had unintended consequences: the regulation reduced research budgets, decreased coverage of SMEs, and weakened small brokers. In 2024, the United Kingdom reintroduced bundled payments for research and execution, subject to governance and transparency conditions. The EU has begun to relax MiFID II (Listing Act, currently being deployed) and could go even further. The debate is ongoing in Brussels.

For the individual investor, the recommendation itself is only a shortcut. The essentials are found in the assumptions: what growth is anticipated, what risks are identified, and what sector comparisons are used. A twelve-month price target is neither a promise nor a guarantee. It can be revised several times a year, sometimes abruptly, if the context changes.

Equity research is therefore a market within the market. The sell side produces visible analyses that structure the consensus and feed information flows. The buy side consumes, critiques, supplements, or contradicts these analyses in the shadows. Independents try to provide an alternative based on their reputation for autonomy. And in the middle, stock prices fluctuate based on expectations that form, dissolve, and correct themselves.

How to obtain analyst notes?

Sell-side notes are not published for free access on the Internet like a news article. They circulate in a professional circuit that is structured and largely closed to the general public.

First channel: direct distribution to institutional clients. When an analyst publishes a note, it is sent by email to subscribed investors via the proprietary platforms of the bank or broker. Large firms have secure portals where clients can consult reports, models, updates, and conference replays. This is the primary circuit.

Second channel: professional financial information platforms. Bloomberg, Refinitiv (formerly Reuters), FactSet, or S&P Capital IQ integrate recommendations, target prices, and especially earnings estimates into their databases. What becomes visible to the market at large is not always the full note, but the change in recommendation or the revision of figures. This is how the "consensus" is formed—the average of sell-side analysts' estimates.

Third channel: meetings and conferences. Analysts organize calls after the publication of an important note or after quarterly results. They participate in roadshows, sector conferences, and investor meetings where they present their views. Part of the value of the sell side lies not just in the PDF sent in the morning, but in direct access to the analyst and the opportunity for managers to ask questions.

Fourth channel: specialized media. Financial news agencies and stock market websites like MarketScreener often publish summaries or reveal the main conclusions of these notes, without providing access to the full document. This is how the individual investor discovers the existence of the note. Journalists obtain these analyses because they have built relationships with their sources. However, some brokers also have a policy of distributing their studies to the press via their communication agencies to gain increased media exposure.

Fifth channel: research aggregators. Companies like Visible Alpha or ResearchTree specialize in collecting and reselling analyses produced by different brokers. They allow investors to access a wide range of notes via a single subscription, thus constituting a secondary market for research. However, this channel very often involves sponsored research.

Finally, there is a more discreet channel: informal exchanges. An analyst may talk with a key client, explaining their reasoning in more detail or clarifying what led them to change their opinion. These interactions are not supposed to transmit privileged information, but they contribute to the circulation of convictions in the market.

It is important to understand that a sell-side note is a commercial product. It is intended primarily for professional clients, distributed via paid or restricted channels, and then partially echoed to the general public through a ripple effect. What the retail investor sees in a news feed is often only the surface of a longer, more technical document embedded in a network of exchanges between banks and institutional investors. In fact, paying for an isolated note is rarely profitable for an individual investor. It is generally more rational to go through a broker that negotiates global distribution rights with several research houses and offers these analyses as a supplement to its service, rather than buying reports individually.

In the second part, we will look at what these research notes look like and what they contain.