What are Target Stock Prices?
A target price for a stock is a figure published by a securities industry person, usually an analyst. The idea is that the target price is a prediction, a guess about where the stock is headed. Target prices usually are associated with a date by which the stock is expected to hit the target. With that explanation out of the way..
Why do people suddenly think that the term du jour “target price” has any meaning? Consider the sources of these numbers. They’re ALWAYS issued by someone who has a vested interest in the issue: It could be an analyst whose firm was the underwriter, it could be an analyst whose firm is brown-nosing the company, it could be a firm with a large position in the stock, it could be an individual trying to talk the stock up so he can get out even, or it could be the “pump” segment of a pump-and-dump operation.
There is also a chance that the analyst has no agenda and honestly thinks the stock price is really going places. But in all too many cases it’s nothing more than wishful guesswork (unless they have a crystal ball that works), so the advice here: ignore target prices, especially ones for internet companies.
Article Credits:
Last-Revised: 25 Jun 2000
Contributed-By: Uncle Arnie