In Investing, What is a Target Price?
Target prices are the anticipated prices that investors project a given stock or security will trade at within a specified time period. The target price can relate to both buying and selling stock other types of securities. Analysts may assess the target price of a given investment in the short term or the long term. Calculating the target price is slightly different, depending on what the investor wishes to do in relation to the stock. For example when the investor is looking at short or long hedges as they relate to the stock, this would involve adding the current futures price to the expected basis. When attempting to project a target price as it relates to puts, the investor would subtract the premium from the futures price and add back the expected basis. When a call is the intended strategy, this would involve adding the futures price, the premium, and the expected basis to arrive at the target price. Generally, the time frame for calculating the target price is anywhere from six
