The Big Problem With Target Price Predictions

There is a big problem with target share price predictions.

A lot of people like to talk about their target share prices for a company, but very often these predictions come with a date.

People will say that they think a company's target share price is $X by date Y.
"I think Tesla will be worth $1,500 by the end of 2022"

And there is a big problem with this way of thinking because it doesn't really make sense.

Evaluating a target share price can be very sophisticated and involve a lot of analysis.

But there is no mathematically robust way to set a date for when you think the stock market will agree with your valuation.

And on top of that, it doesn't make any sense to understand what the value will be in 10 years' time if you are making an investing decision now.

You are not investing money in 10 years. You are investing it today so you need to understand if the sum of the future cash flows of the business can be bought at a discount today. Not at a random point in the future.

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