How far out does a Club stock price target project: three months out, six months out, or one year out? For example, you raised guidance on NVDA to $300 per share. How far away time-wise is this projection? Best Regards, Terry In general, our targets represent the price level we expect the stock to realize in the next six to nine months. To understand why, it’s important to remember what exactly a price target is: our best estimate of a company’s fair value, given all the information that we have. Our price targets are based (usually but not always) on earnings estimates for the next full fiscal year. For Nvidia (NVDA), our price target for the dominant artificial intelligence chipmaker of $300 per share is based on the current fiscal year’s forward earnings estimates. Nvidia has a weird calendar: fiscal 2024 (FY24) started in February 2023 and runs through the end of January 2024. At around $260, Nvidia now trades at 57 times the sum of earnings estimates over the next four quarters. At $300, nearly 15% higher than current levels, the stock would go to 67 times based on those same FY24 estimates. However, it would go down to 50 times forward fiscal 2025 (FY25) earnings estimates. The estimates we base our targets on are just that — estimates. The thinking is that as each quarter rolls in and we get actual numbers — assuming the actual results meet or exceed the estimates — the stock will trend toward our target as investors gain confidence in management achieving, if not exceeding, the full-year estimate. One thing to keep in mind regarding estimates is that analysts are constantly revising their estimates up or down based on checks and trends. They also update their price targets based on these updated estimates. As a result, sometimes price targets are moving targets versus planting a flag in the ground about one certain price. NVDA YTD mountain Nvidia (NVDA) YTD performance Now, the reason we view our targets as achievable in six to nine months (before all the quarters are reported) is twofold. First, Wall Street is always looking for where the puck is going, not where it is or where it’s been. So, if you wait for the entire year to play out, you’ll likely miss the whole move. That’s why we focus on forward estimates and not trailing results. Second, and this is important because it plays very much into our next example, a little over halfway through a company’s fiscal year (about six to nine months in), analysts tend to increase their focus on the next fiscal year and begin placing more weight on that number. As that happens, the stock begins to screen cheaper — assuming that earnings will increase the following year. (In Nvidia’s case, it’s currently expected to grow over 30% in FY25.) Shares can move higher without being viewed as more expensive based on valuation. To help drive the point home, consider that at $260 Nvidia trades at 57 times FY24 earnings estimates. However, at $300, based on FY25 numbers, shares trade at 50…
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