Price targets are 12-month forward projections published by sell-side analysts, typically derived from discounted cash flow models, comparable company analysis, or sum-of-parts valuations. The mean price target (the average of all outstanding analyst targets) is widely used as a quick gauge of consensus upside or downside relative to the current price — a stock trading significantly below consensus targets is theoretically undervalued to the analyst community, while one trading above targets may be stretched. Price targets are revised frequently in response to earnings reports, guidance changes, and macro shifts, and the direction of revisions (targets moving up or down as a group) is often more informative than any single target level. Studies have found that consensus price targets have historically overstated upside returns, partly because analysts tend toward optimism and partly because targets are set looking 12 months ahead through assumptions that frequently prove incorrect.
