How to Get a Reasonable Target Stock Price

If you are going to buy a stock, and especially if you are going to use options, one of the most important questions you can answer is:

Where do you think the stock can actually go?

That sounds simple. It isn't.

A target stock price is an estimate of where you believe a stock could reasonably trade. The difficult part is determining what that number should be.

A target stock price is not necessarily the same as fair value. Fair value attempts to estimate what a company is worth, while a target price asks the more practical question: where could the stock reasonably trade if your investment thesis develops as expected?

There is a legitimate process for building a target stock price from scratch, and I am going to show you what it looks like using two real trade ideas.

You will also see why most investors probably don’t want to go through the full exercise every time they look at a stock.

At the end, I’ll show you how to find a high-quality target range in only a few minutes.

The Basic Process

In many cases, the process comes down to four questions:

That fourth question matters because a target price becomes much more useful when you also have an idea of when the stock could get there.

It becomes essential when using options because the trade has an expiration date. In fact, without an expected stock outcome, there is no meaningful way to compare the dozens of strikes and expirations available and determine which option best fits the investment idea.

For a directional options investor, having a reasonable Target Stock Price is especially important. Without an expected stock outcome, there is no meaningful way to compare the dozens of strikes and expirations available and determine which option best fits the investment idea.

The final calculation may look simple. The work behind it often is not.

Two Winning Picks Premium published trade ideas show how different the process can be.

Example 1: Lululemon

Lululemon (LULU) was an earnings-reset thesis.

The stock had already fallen sharply, but the bigger question was whether the company's earnings estimates were still too high. Management was guiding to roughly $11.05 of FY26 EPS, yet Q1 EPS had already fallen 35%, Q2 was being guided down more than 40%, U.S. sales remained weak and margins were under pressure.

The first step was to estimate what earnings might look like if the deterioration continued.

My working assumption was approximately $9 of EPS and an 11x multiple.

That produced a target stock price of approximately $99.

The $99 was not where the analysis started.

It was the output of the analysis.

Technical analysis also helped provide context. Lululemon had important support around $110 going back several years, and a break of that level could open the door to substantially lower prices.

[See the full LULU trade idea →]

Example 2: Bloom Energy

Bloom Energy (BE) required a completely different process.

This was not a declining-earnings story. It was a growth and operating-leverage story.

Bloom generated approximately $2 billion of revenue in 2025 and ended the year with product backlog around $6 billion. Revenue then accelerated sharply in 2026, with Q2 revenue increasing 166% year over year. Even more interesting, management said backlog was growing faster than revenue in 2026. I then considered a scenario in which product backlog could eventually approach $15 billion.

That immediately created another question:

How much of that backlog could eventually turn into revenue?

From there, the analysis moved through revenue, margins and potential earnings.

At $9 of EPS, a 45x multiple implies approximately $405.

At $12 of EPS, the stock could reach $400 at a much lower multiple.

The important point was not that Bloom had to reach one exact earnings number or valuation multiple. The table created a range of possible outcomes and showed what had to happen financially for a $400 stock price to become reasonable.

[See the full Bloom Energy report →]

Same Question, Different Process

Both examples started with the same question:

Where could the stock go?

But the work required to answer it was completely different.

For Lululemon, I had to estimate how far earnings could fall and what multiple investors might place on those lower earnings.

For Bloom Energy, I had to think through revenue growth, backlog conversion, margin expansion, future EPS and valuation.

Another stock might require a different approach altogether.

A cyclical company may require normalized earnings. A bank may require book value and return on equity. A mature company might be valued primarily on cash flow. In other situations, historical trading ranges or technical analysis may play a much larger role.

This Is the Problem

You can absolutely build target prices this way.

But doing it properly can require reading earnings reports and conference calls, studying management guidance, rebuilding earnings estimates, analyzing margins, understanding historical valuation ranges, developing multiple scenarios and deciding which technical levels matter.

Then you must do it all over again for the next company, where the important variables may be completely different.

For investors who enjoy deep fundamental research, that process can be worthwhile.

But most investors probably do not want to build a full research model every time they find an interesting stock idea.

There Is a Faster Way

After more than 20 years on Wall Street, I developed a much faster way to establish high-quality target ranges without going through this entire process every time.

I show you exactly how I do it in the Masterclass.

Watch the Masterclass →