Target Price

Target Price is the anticipated future price at which an investor expects a stock to reach based on their analysis of the company's fundamentals, valuation, and market conditions.

It is the price level at which an investor plans to exit a trade (either by selling or taking profit) to maximise returns. Target prices are set based on fundamental analysis, technical analysis, or a combination of both. What is a Target Price? If you analyse Infosys and believe its fair value is ₹2,000 based on a P/E of 25x its estimated FY2026 EPS of ₹80. If the current market price is ₹1,500, your target price is ₹2,000 — implying an upside of 33%. You would buy the stock and hold it until it reaches ₹2,000, at which point you would sell and book the profit. Target prices are commonly set by equity research analysts covering stocks. They use DCF (Discounted Cash Flow) models, Comparable Company Analysis (comparing P/E, EV/EBITDA ratios with peers), Sum-of-the-Parts (valuing each business segment separately), or relative valuation methods. A "BUY" call typically comes with a target price 20% to 40% above the current market price. A "HOLD" call suggests the stock is fairly valued at current levels. A "SELL" call implies downside to the target. For investors, the relationship between the current price and the target price is called the "upside." If a stock is trading at ₹300 and the analyst's target is ₹400, the upside is 33%. This upside is compared against the risk — if the downside (stop loss) is ₹250 (16% loss), the risk-reward ratio is 33:16, or approximately 2:1. A good trade typically has a risk-reward ratio of at least 2:1. Target prices are not guaranteed. Analysts can and do get them wrong. An analyst's target price for a stock might assume 20% earnings growth, but if global conditions deteriorate, the actual growth might be 5%, and the stock might not reach the target for years. Markets can remain irrational far longer than investors expect — a stock trading at 50% below its intrinsic value can stay there for years before re-rating upward. For personal investing, setting a target price helps avoid two common mistakes: selling too early out of fear and missing out on further gains, or holding a stock far beyond its fair value out of greed. A practical approach is to set a "soft target" (sell 25% of your holding if the stock reaches 75% of the target) and a "hard target" (sell the remainder at the target price). This allows you to participate in further upside while locking in some profits along the way.