Analysts meet with management and other stakeholders to help determine a company’s current and future value based on its financials and growth potential. They use this information to generate earnings estimates and target prices that help them form their overall ratings. While we don’t need to pay too much attention to analyst ratings, we should keep an eye on price targets. A price target is what analysts think the stock is worth per share.
When you take an average of analyst price targets, you can get a good idea of what price a stock could reach. If a stock is trading below its average target price, there is a solid chance it will increase its price. If a stock is trading more than 20% below its average price target, there is a strong chance it will rally, which is why investors should consider stocks such as Regeneron Pharmaceuticals, Inc. (REGN), ArcelorMittal (NYSE:MT), and Boyd Gaming Corporation (BYD).