A stock price target is an analyst's estimate of where a share price could trade at a specified future point, commonly around 12 months ahead. It is normally produced from a valuation model rather than from a simple percentage added to the current share price.
Depending on the company, analysts may use discounted cash flow, earnings multiples, enterprise-value multiples, sum-of-the-parts analysis or a combination of methods.
Why targets move
Targets can change because revenue, profit or cash-flow forecasts change. They can also change because the analyst applies a different valuation multiple, updates the discount rate or rolls the model forward to a later forecast year.
Those distinctions matter. A target raised because earnings expectations improved carries a different signal from one raised mechanically because another quarter has passed.
Consensus targets hide dispersion
The average target across analysts is easy to quote, but the range is often more informative. A narrow range suggests analysts broadly agree on the company's earnings power and valuation. A wide range signals uncertainty around growth, margins or the appropriate multiple.
Investors should therefore look at the high, low and median targets where available rather than treating consensus as a precise fair-value estimate.
Targets should not be read as probabilities
A target of $200 does not mean an analyst believes the stock has a fixed probability of reaching $200. It is the output of a model under a set of assumptions.
For that reason, target changes are most useful when read alongside estimate changes, recommendation changes and the analyst's stated thesis.