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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

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

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

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