Price Target
Quick Definition
An analyst's projected future price for a stock, typically over a 12-month horizon, based on fundamental analysis and valuation models.
Key Takeaways
- Price targets are analyst projections of a stock's price, usually over 12 months.
- They are derived from valuation models like DCF, multiples, and DDM.
- Analysts tend to be overly optimistic; use price targets as one of many inputs.
What Is Price Target?
A price target is a Wall Street analyst's estimate of where a stock's price will be in the future, typically over a 12-month time horizon. Analysts at investment banks and research firms derive price targets using various valuation methodologies including discounted cash flow (DCF) analysis, comparable company multiples (P/E, EV/EBITDA), sum-of-the-parts valuation, and dividend discount models. Price targets accompany analyst ratings (Buy, Hold, Sell) and are updated regularly following earnings reports, company developments, or changes in market conditions. The consensus price target is the average of all analysts covering a stock. While price targets provide useful reference points, studies show they have limited predictive accuracy — analysts tend to be overly optimistic and frequently revise targets to chase price movements. Investors should use price targets as one input among many rather than as precise predictions.
Price Target Example
- 1Goldman Sachs raised its price target on Nvidia from $800 to $1,100, citing strong AI chip demand.
- 2The consensus price target for Apple was $200, representing 15% upside from its current $175 price.
Related Terms
Analyst Rating
A professional securities analyst's recommendation on whether to buy, hold, or sell a particular stock, typically issued by investment banks and research firms.
Consensus Estimate
The average of analyst forecasts for a company's earnings, revenue, or other financial metric.
Price-to-Earnings Ratio (P/E)
A valuation metric comparing a company's stock price to its earnings per share, indicating how much investors pay per dollar of earnings.
Earnings Report
A quarterly or annual filing where a company discloses its financial results, including revenue, net income, and EPS.
Market Capitalization
The total market value of a company's outstanding shares, calculated by multiplying the stock price by the number of shares outstanding.
Stock
A security representing ownership in a corporation, entitling the holder to a share of profits and voting rights.
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