What is a price target, and what is it for? Eric
Savitz and David
Gaffen report today on all the new price targets being put on Google: with
the stock trading around the $650 level, Credit Suisse has upped its price target
from $600 (which I guess would imply a "sell" rating) to $800 (phew!
the "buy" rating can remain!), while Pacific Crest Securities, trying
to stay ahead of the curve, has a price target of $850.
Investopedia reckons
that a price target is "the price at which the trader would like to exit
his or her existing position so that he or she can realize the most reward"
– but that’s clearly not the case here, since every time the target is
reached, the goalpost just gets moved, and there certainly seems to be precious
little exiting going on. So if it’s not that, what is it? What’s the difference
between Pacific Crest’s $850 target and CIBC’s $700 target? Is it just a way
of showing degrees of bullishness? Is there anything that an investor can actually
do with these numbers?