- AI chip play Nvidia seen up 31% next year
- Goldman Sachs sees S&P 500 gaining 8%
- Consensus thinks Tesla could fall in 2024
Investors love a price target – it’s a way of explicitly slapping the upside (or downside) potential on a stock. There’s no guarantee that a share will hit its estimated target, but they can be useful gauges when deciding whether to buy or sell a stock.
Given the so-called ‘Magnificent Seven’ stocks generated almost all of 2023’s gains for the S&P 500, we thought it might be helpful to take a peek at what analysts believe is the share price potential for Apple (AAPL:NASDAQ), Microsoft (MSFT:NASDAQ), Amazon (AMZN:NASDAQ), Alphabet (GOOG:NASDAQ), Meta Platforms (META:NASDAQ), Nvidia (NVDA:NASDAQ), and Tesla (TSLA:NASDAQ) through 2024.
Why Goldman Sachs has upped its 2024 S&P 500 estimate
For reference, Goldman Sachs sees the overall S&P 500 index climbing around 8% next year.
WHAT IS A PRICE TARGET?
Analysts calculate price targets as a reflection of what they think is a fair price for a stock based on current and past market performance, and as an indicator of underlying value creation potential ahead. But there is no one-size-fits-all way of crunching the numbers, and each analyst will use various valuation methodologies to predict a company’s future earning potential from which they extrapolate a target price for the stock.
Some use future earnings as the basis for their calculations, others might use sales, book value or a combination of these and other metrics. Then there’s the more complicated discounted cash flow analysis, which is also widely used to establish price targets for stocks.
WIDE PRICE TARGET RANGES
This means that price targets can range wildly for the same stock.
For example, Tesla’s price target range runs from $85 at the low point up to $380 at the top end. This means Tesla’s shares could fall anywhere up to 67% over the next year, or they could rally as much as 48%, depending on which analyst's target you use.
This is why it is usually sensible to take the consensus, the middle ground between the most pessimistic and optimistic analyst estimates.
The bottom line for investors is that a stock’s price target can be a really useful way of capturing how analysts feel about a company and its future potential, although they are far from perfect.
