How Do Stock Price Targets Work?

The price target of a stock is the price at which the stock is fairly valued with respect to its historical and projected earnings.

Investors can maximize their rates of return by buying and selling stocks when they are trading below and above their price targets, respectively.

How do I set a stock price target?

It’s important to set price targets on all your stocks the day you purchase them. Your target should be based on the P/E of your stock, multiplied out by expected future earnings. I recommend that you at least think about what price your stock can achieve within 18-24 months. And that should at least be a 30%-50% gain.

How accurate are stock price targets?

Based on their 2012 study of more than 11,000 analysts from 41 countries, the overall accuracy of target prices is not very high, averaging around 18% for a three-month horizon and 30% for a 12-month horizon. The study indicated there are some characteristics that indicate an analyst might be a better forecaster.

Is Target a buy or sell?

So Target stock, which boasts solid fundamental and technical ratings, is not a buy right now. It could use much improvement in the Accumulation/Distribution Rating. But its overall fundamental strength and decent stock action in the current market correction could warrant a spot on investors’ watchlists.

How often are price targets met?

When an analyst issues a price target, it indicates that the brokerage expects (at least ostensibly) that the stock will reach the target within a certain time period, usually a year or 18 months.