In Sight

Categories: Investing

The price target was $100. The stock is now trading at $87. Only 13 bucks away and, in the aftermarket, after the great quarter the company just printed, the stock is up 5 bucks to $92.

That target price of "par" is...in sight.

Related or Semi-related Video

Finance: What is a target price?2 Views

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And finance Allah shmoop What is a target price Oh

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with Wall Street stock brokers Cell site analyst Mumbles Well

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if the company produces a dollar twenty and earnings this

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year up from a dollar next year and twenty percent

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growth is sustainable for the foreseeable future than the stock

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should trade it well give or take twenty times earnings

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And so forward earnings of a dollar twenty is twenty

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four dollars Price Target up six bucks from eighteen here

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So yeah twenty for is my target price So that's

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a target price It given stock's trading at whatever price

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There's some imaginary Bowman like that boring guy from the

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Marvel movies aiming his arrow from here to here where

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the you know Apple sits on the other guy's hit

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Why do target prices even exist Well in the seventies

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and eighties Street analyst basically only gave three recommendations by

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cell and old but there needed to be more granularity

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like Well sure Disney was a great company and it

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always seemed to be ABI but at any price or

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just up to some number So Analyst basically gave their

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stockbrokers and additional thing to talk to their clients about

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I'ii want to stock did hit a given price target

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The analyst would then raise it I raise the target

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for whatever reason or would change their rating from say

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by toe hold So how does that work Well the

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Wall Street analyst presents to the world her view of

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the value of the given company usually something presented in

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the form and flavor of earnings or earnings Multiple Why

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earnings Because every investor on Wall Street whether they grew

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up covering newspaper print or semi conductors speaks the language

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of earnings like Gap earnings official earnings that is earning

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supplied Any industry is a rational driver of stock price

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multiples And yes sometimes the rationale behind target prices comes

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from weird evaluation metrics like revenue multiples And usually there's

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a lot of mumbling that gets done behind the scenes

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there Like uh well the flying car industry is brand

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new with nobody having any profits or earnings and spending

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all their money to buy growth So the industry trades

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at an average of six times revenues and we think

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yes fly No crash should trade at a one times

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revenue multiple premium to the market because of you know

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its emphasis on safety and not crashing So with one

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hundred million of revenues projected this year it should trade

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it seven times that number for evaluation of seven hundred

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million dollars But today it's market capitalization is only five

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hundred fifty million so there's some twenty five ish percent

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upside from here if it hits our target price but

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let's hope that's the only target the flying cars hit

Find other enlightening terms in Shmoop Finance Genius Bar(f)