Price Target

An analyst's projection of where a stock's price will be in 12 months.

What Is a Price Target?

A price target is a Wall Street analyst's estimate of what a stock will be worth in 12 months. Analysts publish price targets alongside their ratings (buy, hold, sell) and update them after major events like earnings reports.

How Analysts Set Price Targets

Most analysts use a combination of methods:

• Multiple-based: Estimate future EPS and apply a target P/E ratio. If they expect $5 EPS and assign a 25x P/E, the target is $125.
• DCF model: Project future cash flows and discount them to present value.
• Sum-of-parts: Value each business segment separately and add them up.

Should You Trust Price Targets?

Academic research shows that analyst price targets are, on average, overly optimistic. Most analysts have a bullish bias. However, changes in price targets are more useful than the targets themselves. A significant price target increase after earnings often signals genuine positive reassessment.