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I've seen this a lot and while it makes rational sense, it doesn't mean a whole lot more to me. I saw today that "XYZ reiterated coverage of ABC company at Buy with a price target of $X." What does this mean?

Typically the target price is a 12 to 18 month thing. Although it may be longer if the time frame given is a LT buy as opposed to them trading ratings.

I've noticed that these price targets are generally much higher than the current stock price and while hopeful, if the time-frame is 5 years, it isn't quite as optimistic.

Well have you ever heard of investment banking operations known as underwriting? This is where a company gets a company like XYZ to sell the stock or bonds to the public and XYZ takes in some nice $ on it.(If you are curious take any recent IPO and look in the prospectus to see that the offering price is $x but $y goes to the underwriters, lawyers, etc. and that the company gets $x-$y in actual proceeds.)

Here's a link that should be useful if you are curious about the life cycle of a stock(Chapter 6 would the key for what you are investigating I think):

http://www.nasdaq.com/about/going_public.stm

JB
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