The price of the S&P 500 has decreased by 20% since December 31. Where do industry analysts believe the price of the index will go from here?
In conjunction with the decline in the price of the S&P 500 since the start of the year, industry analysts have also been lowering their target prices on S&P 500 companies in recent months. Since peaking at 5,344.26 on January 20, 2022, the bottom-up target price for the S&P 500 has declined by 7% to 4,987.28 on June 23, 2022. The bottom-up target price is calculated by aggregating the median target price estimates (based on company-level estimates submitted by industry analysts) for all the companies in the index.
This week marked the first time the bottom-up target price for the index has dipped below 5,000 since August 23, 2021.
However, it should be noted that the bottom-up target price of 4,987.28 on June 23 was still 31.4% above the closing price of 3,795.73 on the same day. Thus, even with the recent decrease in the bottom-up target price, industry analysts still believe the value of the index will increase by more than 30% in the next 12 months.
At the sector level, the Communication Services (+42.6%), Consumer Discretionary (+40.2%), and Information Technology (+36.5%) sectors are expected to see the largest price increases, as these three sectors had the largest upside differences between the bottom-up target price and the closing price on June 23. On the other hand, the Consumer Staples (+14.8%) and Utilities (+16.1%) sectors are expected to see the smallest price increases, as these two sectors had the smallest upside differences between the bottom-up target price and the closing price on June 23.
At the company level, the 10 stocks in the S&P 500 with the largest upside and downside differences between their median target price and closing price (on June 23) can be found in the tables below. It is interesting to note that only six S&P 500 companies had a target price below their closing price on June 23.
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Caesars Entertainment Inc |
105.00 |
39.52 |
65.48 |
165.7% |
|
DISH Network Corporation Class A |
40.00 |
16.89 |
23.11 |
136.8% |
|
Bath & Body Works, Inc. |
63.50 |
29.54 |
33.96 |
115.0% |
|
Carnival Corporation |
20.07 |
9.65 |
10.42 |
108.0% |
|
Penn National Gaming, Inc. |
59.00 |
28.51 |
30.49 |
106.9% |
|
Royal Caribbean Group |
72.50 |
36.07 |
36.43 |
101.0% |
|
Warner Bros. Discovery, Inc. |
28.00 |
14.12 |
13.88 |
98.3% |
|
Expedia Group, Inc. |
185.00 |
94.02 |
90.98 |
96.8% |
|
MGM Resorts International |
53.00 |
27.17 |
25.83 |
95.1% |
|
Alaska Air Group, Inc. |
75.00 |
39.90 |
35.10 |
88.0% |
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Lumen Technologies, Inc. |
10.50 |
10.95 |
-0.45 |
-4.1% |
|
Clorox Company |
134.50 |
140.11 |
-5.61 |
-4.0% |
|
Campbell Soup Company |
46.50 |
47.40 |
-0.90 |
-1.9% |
|
Consolidated Edison, Inc. |
90.00 |
91.31 |
-1.31 |
-1.4% |
|
General Mills, Inc. |
68.00 |
68.98 |
-0.98 |
-1.4% |
|
Kimberly-Clark Corporation |
131.00 |
132.08 |
-1.08 |
-0.8% |
|
Domino's Pizza, Inc. |
400.00 |
398.13 |
1.87 |
0.5% |
|
Progressive Corporation |
110.50 |
109.75 |
0.75 |
0.7% |
|
Amgen Inc. |
245.00 |
243.09 |
1.91 |
0.8% |
|
Brown-Forman Corporation Cl. B |
70.50 |
69.50 |
1.00 |
1.4% |
In recent time periods, industry analysts have underestimated the closing price of the index 12 months later using month-end values. Over the past five years, industry analysts have underestimated the price of the index by 2.1% on average (using month-end values). Over the past 10 years, industry analysts have underestimated the price of the index by 0.2% on average (using month-end values).
However, over longer time periods, analysts have typically overestimated the closing price 12 months later. Over the past 15 years, industry analysts have overestimated the price of the index by 7.7% on average (using month-end values).
On June 30, 2021, the bottom-up target price was 4,795.55. Nearly one year later (on June 23, 2022), the S&P 500 closing price was 3,795.73. Based on yesterday’s closing price, industry analysts overestimated the closing price at the end of June 2022 by 26.3% nearly one year ago.
It is interesting to note that as analysts have lowered their target prices on S&P 500 companies over the past few months, they have maintained an unusually high number of Buy ratings on S&P 500 stocks during this same period. As of today, 57.0% of all ratings on stocks in the S&P 500 are Buy ratings, which is above the five-year (month-end) average of 53.3%. In fact, prior to the recent surge in Buy ratings, the last time the (month-end) percentage of Buy ratings was above 55% was September 2011. For more details on ratings on S&P 500 stocks, please see our recent article on this topic.
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