What is a price target?

Price targets can pertain to all types of securities, from complex investment products to stocks and bonds. When setting a stock's price target, an analyst is trying to determine what the stock is worth and where the price will be in 12 or 18 months. Ultimately, price targets depend on the valuation of the company that's issuing the stock.

What is an analyst price target?

A analyst price target is an analyst's estimated future price for a particular investment security. To arrive at a target price for a stock, the analyst may consider many factors, which are typically based on the outlook and projected earnings for that company. What Is the Consensus Price Target?

What if a target price is higher than the current price?

For example, if an analyst sets a target price that is higher than the current price, an investor may infer that the analyst expects the stock price to rise in the future. If the price target is lower, the analyst expects the stock price to fall.

Should investors set their own price target?

Therefore, investors should set their own price target when determining when to enter and/or exit a trade. In order to come up with their price target, an analyst must first determine the stock’s fair value. A common way that analysts calculate the price target for a stock is by creating a multiple of the price-to-earnings ratio.