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Industry Analysts Predict the S&P 500 Will Close Above 5,200 in 2022

Earnings

By John Butters  |  December 13, 2021

With 2021 coming to a close, analysts are making predictions for the closing price of the S&P 500 for next year. A number of market strategists (typically using a top-down approach) believe the S&P 500 will close at or above 5,000 by the end of 2022. Do industry analysts (using a bottom-up approach) also believe the S&P 500 will close at or above 5,000 at the end of 2022?

The answer is yes. Industry analysts in aggregate predict the S&P 500 will have a closing price of 5,225.00 in 12 months. This bottom-up target price for the index is calculated by aggregating the median target price estimates (based on the company-level target prices submitted by industry analysts) for all the companies in the index. On December 9, the bottom-up target price for the S&P 500 was 5,225.00, which was 11.9% above the closing price of 4,667.45.

sp-500-closing-price-bottom-up-target-price

At the sector level, the Communication Services (+22.0%) and Energy (+19.2%) sectors are expected to see the largest price increases, as these sectors have the largest upside differences between the bottom-up target price and the closing price. On the other hand, the Utilities (+6.2%) sector is expected to see the smallest price increase, as this sector has the smallest upside difference between the bottom-up target price and the closing price.

sp-500-sector-level-bottom-up-target-price-vs-closing-price

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 December 9) can be found in the tables below.

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

Company

Target

Closing

Diff ($)

Diff (%)

Activision Blizzard, Inc.

95.00

59.07

35.93

60.8%

Penn National Gaming, Inc.

80.50

51.02

29.48

57.8%

Under Armour, Inc. Class C

32.00

20.32

11.68

57.5%

Discovery, Inc. Class C

35.50

22.69

12.81

56.5%

Global Payments Inc.

196.00

127.37

68.63

53.9%

Discovery, Inc. Class A

36.00

23.58

12.42

52.7%

News Corporation Class A

33.00

21.77

11.23

51.6%

Alaska Air Group, Inc.

77.50

51.42

26.08

50.7%

Caesars Entertainment Inc

136.50

90.81

45.69

50.3%

Generac Holdings Inc.

540.00

360.64

179.36

49.7%

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

Company

Target

Closing

Diff ($)

Diff (%)

Fastenal Company

52.50

62.81

-10.31

-16.4%

Xilinx, Inc.

190.00

215.02

-25.02

-11.6%

Consolidated Edison, Inc.

73.00

81.68

-8.68

-10.6%

Tesla Inc

899.00

1003.80

-104.80

-10.4%

Juniper Networks, Inc.

30.00

32.74

-2.74

-8.4%

Lumen Technologies, Inc.

11.50

12.07

-0.57

-4.7%

HP Inc.

34.50

36.15

-1.65

-4.6%

Cintas Corporation

430.00

449.13

-19.13

-4.3%

Church & Dwight Co., Inc.

91.50

95.54

-4.04

-4.2%

Mettler-Toledo International Inc.

1515.50

1582.16

-66.66

-4.2%

However, it is important to note that industry analysts have historically overestimated the closing price of the index at the start of the year. Over the previous 15 years (2006 – 2020), the average difference between the bottom-up target price estimate at the beginning of the year (December 31) and the final price for the index for that same year has been 7.3%. In other words, industry analysts on average have overestimated the final price of the index by about 7.3% one year in advance during the previous 15 years. Analysts overestimated the final value (the final value finished below the estimate) in 10 of the 15 years and underestimated the final value (the final value finished above the estimate) in the other five years.

sp-500-bottom-up-target-price-estimate-vs-actual

However, this 7.3% average includes one year (2008) in which there was a substantial difference between the bottom-up target price estimate at the start of the year and the closing price for the index for that same year (+92%). If the year 2008 were excluded, the average difference between the bottom-up target price at the start of the year and the closing price of the index at the end of the year would be 1.6%. If one applies the average overestimation of 7.3% to the current 2022 bottom-up target price estimate (assuming the estimate changes little between now and December 31), the expected closing value for 2022 would be 4,826.63, which is 3.4% above yesterday’s closing price of 4,667.45. If one applies the average overestimation of 1.6% (excluding 2008) to the current 2022 bottom-up target price estimate, the expected closing value for 2022 would be 5,141.31, which is 10.2% above yesterday’s closing price of 4,667.45.

Listen to Earnings Insight on the go! In our weekly Earnings Insight podcast, John Butters provides an update on S&P 500 corporate earnings and related topics based on his popular Earnings Insight publication. The podcast is made available every Monday—listen on Apple podcasts, Spotify, or factset.com.

The information contained in this article is not investment advice. FactSet does not endorse or recommend any investments and assumes no liability for any consequence relating directly or indirectly to any action or inaction taken based on the information contained in this article.

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John Butters

Vice President, Senior Earnings Analyst

Mr. John Butters is Vice President and Senior Earnings Analyst at FactSet. His weekly research report, “Earnings Insight,” provides analysis and commentary on trends in corporate earnings data for the S&P 500 including revisions to estimates, year-over-year growth, performance relative to expectations, and valuations. He is a widely used source for the media and has appeared on CNBC, Fox Business News, and the Business News Network. In addition, he has been cited by numerous print and online publications such as The Wall Street Journal, The Financial Times, The New York Times, MarketWatch, and Yahoo! Finance. Mr. Butters has over 15 years of experience in the financial services industry. Prior to FactSet in January 2011, he worked for more than 10 years at Thomson Reuters (Thomson Financial), most recently as Director of U.S. Earnings Research (2007-2010).

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