Is the target price of the stock reliable?

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Comprar y comercializar acciones en bolsa es la mejor forma de realizar inversiones, pero en varios casos no sabemos cuál es el mejor momento para acceder o salir de los mercados de valores financieros. Para aproximar estas operaciones existe el llamado precio target de los valores bursátiles. Se trata de un level or qualification that is given by a professional and that serves as a reference source to carry out or not the operation depending on your needs in the investment sector.

Ultimately, the target price of a stock is the price lo que estima un analista de los mercados financieros, dicho de otra forma, lo que en su opinión debería valer la participación de una compañía. En este aspecto, puede convertirse en un soporte en el que dar forma a tu decisión a partir de ahora. Pero be cual sea el caso, es conveniente que se apoye en otras fuentes de información que puedan considerarse fiables. Como a modo de ejemplo los provenientes del análisis técnico y fundamental. Para que de esta dinámica tengas una visión más extensa de cuál es verdaderamente el activo financiero que vas a comprar.

Es cierto que es una strategy bastante frecuente que los pequeños y medianos inversores prefieran por esta fuente de referencia. Buscan el precio objetivo asignado por los profesionales para mostrar si es un buen momento para buy or trade the shares in the financial markets. In particular, those who have less training in this type of operation that they want to do to make their savings profitable. Beyond other series of technical considerations and perhaps in addition to its fundamental principles.

Target price - can we trust it?

The first aspect to which we must refer is that we are first of all before an estimate in the conformation of the prices of the securities of the stock market. This means that these predictions are not confirmed in all cases. Not much less as you will know at that time. It can wonderfully happen that stocks I have never reached this level en precios. Hay muchos ejemplos de este escenario en los mercados de renta variable y que han causado que algunas persons hayan perdido buena parte de sus aportes monetarios.

On the other hand, another of the most relevant characteristics of what the target price really is is that it is very flexible. In other words, it is not always the same and varies depending on the reviews usually carried out by financial institutions or analysts. With ups and downs that can be very intense and to the point of approach the 10%. To the point that they get to mislead a good part of the small and medium investors who do not know what to do with so many changes in the target price of the stock market values.

Strategies that can be carried out

Whatever the case, there are systems that serve to operate with the target price information within the equity markets. If, as an example, shares have been bought below target price asignado por los profesionales, se puede esperar hasta que scope estos niveles para culminar la operación con las correspondientes plusvalías. Pero existe un riesgo sensato de perder un tramo significativo al alza en la iniciativa seleccionada. Cuando además puede suceder que al cabo de unos días o semanas estos precios se revisen al alza y nos dé una sensación muy poco positiva sobre este parámetro que hemos utilizado para invertir en bolsa.

While, on the other hand, there are usually securities that have been traded for many years above the assigned price. And in this scenario, we have not bet on any movement in the equity markets. Therefore, the best solution to avoid unwanted scenarios is be much more flexible en la evaluación de la relevance de los precios objetivo de las acciones. Debido a que es cierto que pueden hacernos ganar mucho dinero en operaciones, pero además que perdamos muchos euros por el camino.

Indicates upside potential

Its best contribution lies in the fact that it is a good parameter to indicate the revaluation potential of a financial asset. In this regard, there is no doubt that if the target price is above the actual list price, implies that there is a potential for appreciation and the recommendation is probably to buy your shares. Although on the contrary, if the target price is below the real price of quotation, in fact it means that it has a very important bearish trip.

The biggest problem for small and medium investors is that different financial market analysts almost never agree on the target price. In some cases they even present differences worth mentioning and that eventually lead to a widespread confusion by users of the stock market. To the point that they do not know what to do in each of the moments in which they have to make a choice about their investments. It is not surprising, then, that in some cases they do not even pay attention to this aspect and prefer other models in stock analysis, such as the technical one.

Determined by banks

One of the aspects that must be anticipated is that in the end it is generally many banks and brokerage houses that carry out analysis of companies to establish a target price for their shares. They may be interested parties in this procedure in which prices are formed, for one reason or another that is not in sight now. And that can lead small and medium investors to take the bad decision. Because, at the same time, the evolution of the share price depends on another series of very relevant factors. Where reviews are always late to the ears of small and medium investors.

On the other hand, it must also be considered that if the company is listed at 20 and the target price is 30, it is interpreted that the value is cheap and therefore it is a possibility of purchase that we should not miss. And quite the opposite in the divergent case in which we will say that stocks are very expensive and we must not waste money in an operation that in the end will not be profitable. Opinions on the target price are therefore diverse, they have a double premium in the investment strategy that will be used from now on.

Stock market analysis

Another aspect that we must look at from now on is the one that has to do with the underweight or overvaluation of the stocks themselves. Well, in this regard it should be noted that a good part of financial organizations and brokerage houses conduct business reviews normally that are publicly traded. In which they are assigned a target price that causes the listed company to be overvalued or undervalued. But it is important to note, on the other hand, that this assessment should only serve as a guide, since they are not totally reliable. Otherwise, on the contrary, it supports the decision that retailers must make to buy or market their shares on the stock markets.

While on the other hand, it is very common to find news such as the following in the media: Morgan Stanley has lowered its target price that it sets for Banco Santander securities to 4 euros, from the previous 6 euros. This fact can disrupt our entire investment strategy and somehow it hurts us. In particular, if we have carried out the operations before having carried out the reviews. Because it is also necessary to pay attention that these revisions in the target prices can be continuous and progressive. So the effect on our investment portfolio can be more than important.

Buy and sell on supports

On the other hand, there are other parameters that are much more credible for buying and selling shares on the stock market. As an example, through the gaps, which in general, is usually established as the zone or price range in which no operation has been carried out. Or through the support and resistance levels they almost never fail their predictions. Beyond other considerations of a technical nature and perhaps also from the point of view of its fundamental principles.

Whatever the case, it is a personal decision that only you can execute since, after all, you are risking the money. But you have different opportunities to select an entry and exit model in stocks. Where each one uses their own strategy with a single objective that is none other than making the money invested profitable, which is, after all, what is involved in these cases. And where the indicative price also plays its role.