Citigroup analysts on Monday (11) raised the S&P 500 target price, predicted the end of this year to close at 4,000 points, on behalf of the broader market there is room to fall, and Morgan Stanley (Morgan Stanley), Wells Fargo (Wells Fargo), Jefferies on the end of this year’s U.S. stocks target price forecast is not far from.
Citi analysts raised the S&P 500 target price by 200 points, the reason is that the 1st quarter corporate earnings far better than the market expectations. Most companies have now reported last quarter’s earnings, with EPS totals more than 20% higher than analysts had predicted.
Citi therefore raised the total EPS of S&P 500 constituent companies from $173 to $184 in 2021, and then to $202 in 2022.
Although Citi raised the S&P 500 year-end price forecast, but compared with Monday’s level of 4188.43 points, which means it will also fall 4.5%. The market closed at 4152.10 points on Tuesday.
One of the main reasons why Citi analysts failed to raise the price target higher was the high price of the stock. Citi predicts that S&P 500 components will be priced at 20 times estimated EPS for 2022, while the current price is about 21.8 times estimated EPS for the next 12 months.
In the case of bond interest rate rise is expected to continue, Citi’s chief analyst Tobias Levkovich warned that the high yield will erode the existing value of future corporate profits.
Morgan, Wells Fargo, Jefferies view
The S&P 500 is expected to end the year with a mediocre performance, citing over-valuation of U.S. stocks.
Mike Wilson, chief analyst of U.S. equities at Big Morgan, currently forecasts the S&P 500 to end the year at 3,900, 7% below Monday’s closing level, based on the same assumption that stock prices will be 20 times the estimated EPS for 2022.
Wilson compared stocks and bonds, he said, holding stocks rather than bonds risk premium (i.e., the broader market surplus yield minus the U.S. 10-year bond yield) is still low, currently 3%, and the 2008-2009 financial tsunami so far rare low level, so for investors at this stage, holding stocks rather than buying bonds is not a big incentive. If the stock price is cheaper, the risk premium will also be a little higher.
Wells Fargo Bank and Jefferies have year-end targets for the S&P 500 at 3,800 and 4,200 points, respectively. This also means that, although corporate profits are still growing, the stock price may reflect more profits than the actual level.
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