What are price targets?

Price Targets are an analyst's best guess at where the stock will trade in 12 months. Analysts publish ratings and price targets on most stocks. Benzinga tracks 120 analyst firms so investors can understand if analysts expect a stock to trade higher or lower. Ratings are directional and typically buy, sell or hold.

How accurate is a price target?

Despite the best efforts of analysts, a price target is a guess with the variance in analyst projections linked to their estimates of future performance. Studies have found that, historically, the overall accuracy rate is around 30% for price targets with 12-18 month horizons.

What does lowering a price target mean?

When an analyst raises their price target for a stock, they generally expect the stock price to rise. Conversely, lowering their price target may mean that the analyst expects the stock price to fall. Price targets are an organic factor in financial analysis; they can change over time as new information becomes available.

How do you determine a price target for a stock?

For fundamental analysts, a common way to discern the price target for a stock is to create a multiple of the price-to-earnings (P/E) ratio —by multiplying the market price by the company’s trailing 12-month earnings.