NISM Certifications · NISM-Series-XV: Research Analyst · Introduction to Research Analyst Profession
A research analyst's report states a 'Buy' rating with a target price. Which description best fits the role of the target price within the report?
A target price is the analyst's estimate of the value a stock may reach over a stated horizon, based on explicit assumptions. It is not a guarantee, nor a price set by the exchange or the company.
- AIt is a guaranteed price at which the stock will trade
- BIt is the analyst's estimate of the value the stock may reach over a stated horizon, based on the stated assumptionsCorrect
- CIt is the price fixed by the exchange for the day
- DIt is the issue price set by the company
Explanation
A target price is an estimate derived from valuation and assumptions over a time horizon, and carries uncertainty. It is neither guaranteed nor set by exchanges or issuers, so only the estimate-based description is correct.
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