It is one analyst's estimate of where a share price could reasonably sit within a stated horizon, usually about twelve months, given their forecasts for the business. It is an opinion with a model behind it, not a measurement.
A rating — buy, hold, sell, or a firm's own wording — expresses a view relative to something, often the analyst's coverage or a sector. A price target is a number attached to that view.
The two do not always move together. A target can be raised while the rating stays unchanged, simply because the model's inputs have been updated.
Targets are usually produced by forecasting a financial measure — earnings, revenue or cash flow — and applying a multiple to it, often the one comparable companies trade at.
That makes a target a product of two estimates: what the business will do, and what the market will pay for it. Both can be wrong independently.
Many targets sit above the current price at any given time, so the absolute number carries less information than it seems to.
What tends to draw attention is the revision: the direction of the change and the reasoning given for it, which reveals what the analyst now assumes that they did not before.
It assumes a timeframe, usually around a year, and says nothing about the path — a target can be reached after a long decline.
Analysts also revise targets in response to price moves that have already happened, which means a target can follow a share price rather than lead it.
One question, no account: what did you come here for, and did you find it? A person reads these, and they shape what gets written next.
From StockMotive — the honest why behind every market move. Educational information only, not investment advice.