Target Price

A target price is the projected price level at which an analyst or investor believes a stock will trade within a specific time frame. Analysts use financial models and valuation techniques to estimate a stock’s future price based on its earnings, growth potential, and market conditions. The target price helps investors decide whether to buy, hold, or sell a stock based on its current market price versus the expected future price.

Example

An analyst sets a target price of $150 for a technology stock, believing that it will reach this price within the next 12 months based on projected earnings growth.

Key points

• The projected price level for a stock within a specific time frame.

• Used by analysts and investors to make buy, hold, or sell decisions.

• Based on financial models, company performance, and market conditions.

Quick Answers to Curious Questions

How do analysts determine a stock’s target price?

Analysts use financial models, such as discounted cash flow analysis or earnings multiples, to estimate a stock’s future price.

What role does a target price play in investment decisions?

Investors use target prices to evaluate whether a stock is underpriced, fairly priced, or overpriced relative to its current market price.

How does the target price reflect a company’s growth potential?

The target price incorporates expectations of future earnings, revenue growth, and market trends, offering insight into the stock’s potential performance.