Industry Analysts Predict the S&P 500 Will Close Above 3200 in the Next 12 Months

From February 19 to March 23, the value of the S&P 500 decreased by 34% (to 2237.40 from 3386.15). Since March 23, the value of the S&P 500 has increased by 23% (to 2749.98 from 2237.40). Where do industry analysts believe the price of the index will go from here?

Industry analysts in aggregate predict the S&P 500 will see an 17.8% increase in price over the next 12 months. This percentage is based on the difference between the bottom-up target price and the closing price for the index as of April 8. 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. On April 8, the bottom-up target price for the S&P 500 was 3238.62, which was 17.8% above the closing price of 2749.98.

At the sector level, the Communication Services (+23.3%) and Financials (+23.3%) sectors are expected to see the largest price increases, as these sectors had the largest upside differences between the bottom-up target price and the closing price on April 8. On the other hand, the Consumer Staples (+11.2%) sector is expected to see the smallest price increase, as this sector had the smallest upside difference between the bottom-up target price and the closing price on April 8.

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 April 8) can be found in the tables below.

S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)

S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)

How accurate have the industry analysts been in predicting the future value of the S&P 500? Industry analysts have overestimated the price of the index by 3.3% on average over the past five years (using month-end values), by 2.3% on average over the past 10 years, and by 9.8% on average over the past 15 years.

However, it is important to note that the bottom-up target price has declined by 11.3% since peaking at 3649.25 on February 26. It will be interesting to see if analysts continue to revise their target prices lower as S&P 500 companies report actual results for Q1 over the next few weeks. While industry analysts in aggregate are calling for a year-over-year decline in earnings for CY 2020 (-8.5%), they are also calling for double-digit growth in earnings in CY 2021 (+18.2%).