WHAT IS A PRICE TARGET?
A price target is the projected future price level of an asset as stated by an investment analyst or adviser. The price target is based on assumptions about the asset’s future supply and demand, technical levels, and fundamentals. For individual traders, who may develop their own price targets for the assets they are trading, the price target is where they will look to exit their position as the originally expected value of the trade has been recognized. Price targets may change over time as new information becomes available.
- A price target is an analyst’s or trader’s projection of where an asset’s price will go.
- A price target can be lower or higher than the current market price of the asset. A higher target price is bullish, while a lower target price is bearish.
- Price targets will vary by the individual since each trader uses different methods to project price targets.
- When prominent analysts change their price targets, it can have a significant impact on the price of the asset.
- Investment horizon is very important when considering price targets. A much larger price target is more reasonably expected over a longer period of time, while a shorter-term price target tends to be more conservative.
- Price targets don’t account for risk tolerance. Controlling risk is up to the trader. A stock may reach the price target, but if it collapses by 50% prior to that it may not be ideal for many investors.