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Technology Stocks : Broadcom (BRCM)
BRCM 54.670.0%Feb 9 4:00 PM EST
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To: md1derful who wrote (4122)8/6/2000 12:53:37 PM
From: FR1  Read Replies (1) of 6531
 
I am interested in finding out the general method used by fund managers to predict the top price for a stock. I assume they are doing something like:

P/E x E = P

So (next year's PE) times (Next year's Earnings) = Price of stock one year from now.

In the case of BRCM, I get a MSDW report dated July 21, 2000. They state:
We rate BRCM outperform with a 12 to 18 month price target of $300.

In the same report they state:
Current Price: $236
EPS 2000: $0.92
PE 2000: 256
EPS 2001: $1.34
PE 2001: 175

Let's see:
Year 2000: (.92) (256) = $235
Year 2001: (1.34) (175) = $234

It doesn't seem to compute. Where did they get their $300 price target from? Anybody know how, in general, the price targets are computed? The information on average expected future earnings seems to be easily available so you would think there would be a consensus on how Target Prices are determined.
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