In the attached article, Barron's surveyed 13 different analysts and the opinions were really far apart. They had price targets from $149 to $228. The range varied by 53% (228/149)!
Analysts give a price targets because that is what analysts are expected to do by investors and their management. But, those price targets are essentially worthless. No one has a crystal ball. Price targets are done simply because of the behavioral bias that uninformed investors want someone "to lean on" that has a "definitive answer". Knowing the stock’s definitive path is like predicting the gyrations of a toddler just learning to walk.
Furthermore, is that price target expected in 6 months, 1 year or 5 years? They are specifically nebulous on this point because it just isn't known.
This is why I am a value investor.
In value investing the key is determining if the stock is "relatively cheap" given the management's track record of successfully navigating their business through whatever challenges they face. Apple’s track record has proven that they are successful “bobbing and weaving” to keep ahead of the pack.
No one knows for sure what the price will be in a year or two or three. But, value investors do know that the market overshoots on the downside and the upside on a continual basis. The reason the market overshoots and undershoots is simply because the market is as full of emotion as it is full of formulas. The formulas are predictable, but emotions are anybody’s guess.
So if you want a formulaic answer to where and when something will happen, you’ll be waiting for a long, long time. Is Apple relatively cheap? I would say it is, but there is no real mathematical formula to explain the emotional side of the market which has significant effect on it’s price in the short term.
The low and high stock prices for AAPL over the last 52 weeks was 142.00 - 233.47. Do you really think the true value of the company changed that much in only a year? Seriously!
