The target price is literally the price target that analysts have set for selling a stock.
In other words, when analysts assign a target price to a stock it means that, according to their estimates, that same stock will reach the target price in a specific period of time which is usually around 12 months.
The attribution of target prices by brokers is a delicate operation as it often has repercussions on the performance of prices on the stock market. Very often a target price revised downwards has negative implications for the stock, while the increase in the target price tends to make the price rise, unless there are other forces pushing investors to sell-off.
The analysts’ judgment, and the consequent attribution of a target price, depend on the company analysis carried out by the brokers. This concerns not only the balance sheet, but also the capital strength, profits, turnover and objectives of a particular company. This is how the target price is born.
