Target sheep (aka racing sheep) are collectible items. They are found in Thunder Run racing and are in both Single Player mode and Multiplayer mode.
Tips for collecting:
In Single Player mode, they are easier to collect because you are not in a stressful race against other vikings!
If you exit the race (in single player mode) before completing the final lap of the race, your dragon will not lose any energy.
The fastest way to get lots of sheep is to collect them all on your first lap and then exit right after.
Collect 5 sheep: Mystery box of fish
Collect 15 sheep: Mystery box of farm decorations
Collect 30 sheep: Mystery box of racing totems
Collect 60 sheep: Mystery box of farm buildings
Collect 100 sheep: 1000 UDT points
Collect 300 sheep: Mystery box of (wild) dragon saddles
Collect 600 sheep: Mystery box of dragon stables
Collect 1000 sheep: Mystery box of dragon eggs