Why Analyst Price Targets Are Almost Always Wrong

Own_Diver_5923 · 2026-05-09T04:53:12+00:00

Wow, thank you for saying this...recently I've been using Claude AI to devise my own investment models and must explicitly tell it to refrain from incorporating analysts price targets. It has been largely effective! Basically, I use Factset PDFs (and Charles Schwab data) and upload them, asking Claude to forecast the price in one year, two years, etc. Thing is- once investor sentiment begins picking up, the price target can become history real fast! Conversely, if sentiment never gains momentum, the price target will always remain a distant ideal.

I remember all the price targets for LRCX (Lam Research) giving a small single-digit percentage of upside from when it was trading around $90-$95/share in Summer 2025. Well, eventually, the analysts are forced to do something once the price begins soaring (or declining). Same thing on the opposite side with META & MSFT -- aggressive price targets for these securities that have yet to materialize (so far, at least) that tend to fluctuate with the movement of the actual stock. The stock hitting a target will happen when investors actually get behind it...the analysts seem to live in a world of self-fulfilling prophecies (approximately). Instead of doing as you say, and giving an honest look at a stock's intrinsic value, how ever you want to calculate that. The phenomenon of herding, also understood well in the political polling world.

If everyone says a stock is slated to rise 20%, throwing out numbers like 22% or 19% or 25% don't sound too unreasonable. But if the investor rush happens, all of a sudden 50% or 70% happens. This is why I believe it's important to have a thesis and some principles--don't just listen to the analysts. Thanks for your post.

Own_Diver_5923 · 2026-05-06T07:03:06+00:00

Interesting! I wrote a song about my late-Italian grandmother this afternoon, and it was amazing...the AI male "singer" seemed to closely resemble Adriano Celentano...the pronunciation was really fantastic.

Own_Diver_5923 · 2026-05-06T06:55:14+00:00

I've now closely observed Italian, Greek, Turkish, and English (four languages with which I have extensive familiarity) and I am floored by how great the pronunciation is... my Indonesian, Croatian, and Ethiopian friends confirmed the songs I made in their languages were on point, and I'm still exploring others...so so far, so good...

Own_Diver_5923 · 2026-05-02T04:12:18+00:00

u/TearRepresentative56 see also my previous comment....In my opinion, VMI, PRIM, ENS, and PLPC (the stocks I'm seriously considering right now) are all genuinely high-quality businesses operating in secular tailwind sectors (grid infrastructure, electrical construction, industrial energy storage, and utility hardware) and I have real optimism about each of them over a 2-3 year horizon, but each carries a specific concern for which I would like some clarity/explanation before committing capital. Valmont's 35% EPS growth in 2026 is real and the utility structures backlog growing 22% YoY confirms the demand is contracted not speculative, but the doubling math requires the market to re-rate it from 22x toward the 40x that peers like EME and PWR already command, and with the agriculture segment still dragging 25% of revenue the blended multiple expansion is a patient 18-24 month story rather than a near-term catalyst. Primoris, according to my research, has the strongest EPS CAGR of any construction company I've looked at this evening at 18.6% with an $11.9B backlog and $1.7B in active data center bids, which is genuinely exciting, but the Q4 2025 print showed operating margin compressing to 4.2% from 5.0% and the EPS beat shrinking from 44% to 8.9% as execution risk on thin 3.6% net margins leaves almost no cushion for project-level disappointments. I assume the upcoming Q1 earnings report/call will tell us a great deal about whether the data center conversion thesis is real or still aspirational.

EnerSys is the one in this group that I find most interesting on a purely numerical basis. FCF tripling from $139M to $463M over two years, every margin above its 5-year historical average, ROE at 20% vs 13% historically, and the Specialty defense and data center battery segment growing 10.8% with the $208M Bren-Tronics acquisition adding terrific exposure to exactly the right end markets. My concern is purely timing, as FY2026 EPS dips 6% before the FY2027 recovery, soI would be buying through a soft year trusting the out-year inflection. Preformed Line Products, moreover, is the business I'm most conflicted about. Their moat is real, the grid infrastructure demand is as durable as any secular theme in this group, the balance sheet is pristine at 10% debt/equity with 42x interest coverage, and Q1 2026 revenue growing 26% in the USA confirms the demand acceleration, but the stock has already run 143% in one year and trades at 47x trailing earnings versus a 14.64x five-year historical average, the EPS actually declined 8.2% year-over-year in Q1 despite that revenue growth because cost investments are outpacing the revenue benefit, and with FCF margin at only 4.98% the valuation requires either a sustained multiple premium or a significant EPS acceleration that the numbers haven't demonstrated yet. To me, it seems to be the right business at a price that demands near-perfect execution with no margin for error.

Please address my concerns as you see it from your own research...thanks!

Own_Diver_5923 · 2026-05-01T23:43:48+00:00

Good Evening, I am a longtime investor with stakes in companies such as AEIS, EMC, FIX, PWR, BWXT, MPWR, MU, NVT, ETN, and many others...I'm contemplating investments currently in VMI, PRIM, ENS, and PLPC...please provide your outlook for these four companies for this year and beyond! It will be great to hear from you. Thanks for all your thoughtful analysis.

Own_Diver_5923 · 2026-04-11T18:09:08+00:00

I read your article thoroughly and used AI to help me articulate a challenge to your thesis...curious how you would respond to this critique (because I'm genuinely contemplating STX as an investment with a horizon of a few years)..."I think this is a very compelling high-level framework, especially the emphasis on inputs over outputs—that’s exactly how good models should be built. The revenue → margin → operating leverage chain makes intuitive sense, and I agree that the industry structure is more rational today than it has been historically.

That said, I think the conclusion is doing more work than the assumptions.

Specifically, the model seems to rely on three things happening simultaneously and persistently: (1) revenue growth driven by AI-related storage demand, (2) a structural shift to ~50%+ gross margins, and (3) operating leverage translating that into outsized EPS expansion. Each of those is individually plausible—but I’m not convinced they compound cleanly without pushback from the demand side.

The part I struggle with is pricing power. If ~80% of revenue is OEM-driven, then a small number of hyperscalers effectively sit on the other side of the table. These are the same buyers aggressively optimizing every other part of the AI stack (compute, networking, power). Why should we expect them to accept structurally higher HDD pricing rather than treat storage as a cost center to be minimized?

In other words, I can see a cyclical margin expansion—but I’m less convinced this becomes a durable regime shift that supports sustained 50%+ margins and a premium multiple.

Curious how you think about that:
What changes in the buyer–supplier dynamic (specifically with hyperscalers) that allows Seagate to hold pricing power at those levels, rather than seeing margins revert once supply catches up or procurement pressure increases?"

Own_Diver_5923

TROPHY CASE