FACT
Analysts price target is a guess linked to their estimates of future performance. Most statistacal backed studies indicate that their overall accuracy rate is around 30% for price 12-18 month targets. As they tend to make long term projections to derive a target price, with a linear exponential thinking and they focus on fundamentals of a company and less on technical, volumes and other market data.
So let me explain how most analysts predict stock prices
The price-to-earnings ratio is likely the ratio most commonly used by investors to predict stock prices. Specifically, investors use the P/E ratio to determine how much the market will pay for a particular stock. The P/E ratio shows how much investors are willing to pay for $1 of a company’s earnings.
Earnings Price Targets
Globally over the past 12 years, financial analysts across the world have been wrong with their 12-month earnings forecasts by 25.3%.
About how many analysts follow a stock
For the entire S&P 1500, there are 18,945 analyst recommendations, which equates to 12.6 analyst ratings per stock.
