Glossary
Price target
An analyst’s estimate of where a stock will trade, typically 12 months out, derived from a valuation model and earnings forecasts.
On this page
A price target is an analyst's estimate of the price a stock will reach over a set period, usually 12 months. It is published alongside a rating such as buy, hold or sell, and it summarizes the analyst's model in a single number. Investors see price targets everywhere, in headlines, on quote pages and in "upside" columns, so it helps to know how they are built and how far to trust them.
How it works
Most targets come from Sell side analysts at banks and brokerages. A typical method multiplies a forecast of future earnings by a valuation multiple the analyst considers fair. Others use a Discounted Cash Flow (DCF) model or a sum-of-the-parts valuation for companies with several businesses.
Data services often show a consensus target, the average or median of all published targets, along with the high and low.
How to read one
- Check the spread. Targets ranging from $90 to $180 tell you analysts disagree sharply, which is more informative than the average.
- Watch the revisions. A cluster of raised targets after an earnings report says more about changing expectations than the level itself.
- Mind the lag. Targets often chase the price. After a big rally, analysts frequently raise targets to stay above it.
- Consider incentives. Sell-side research is distributed by firms with banking and trading relationships, and buy ratings have historically far outnumbered sell ratings.
Stocks frequently miss their 12-month targets by a wide margin in either direction, so a target is best read as the output of one analyst's model, not as a forecast to rely on.