Why do price targets released by finance institutions on stocks matter?
In: Economics
Typically the folks who work for banks’ research arms also have direct contacts with management and more insight into the company than your average person.
I think that the notion that people react to the price targets changing is a bit misleading though – I think people react to the new research, which typically comes with a whole host of revised assumptions and projections. The price target is just a single data point in a whole suite that gets released at once
Because investors would like to know where the stock is headed and these institutions have supposedly done their research.
These institutions are considered industry experts, so them saying a company will be at $X price is essentially an expert telling the world what the future will be and people can use that information to choose how to invest their money. Wouldn’t it it be awesome if someone simply told you what the future price of a stock will be? Think of the money you can make! They are literally trying to predict the future.
Now, whether or not these people are actually “experts”, and how often they get it right or wrong would be a whole different story and question.
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