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Industry Analysts Project 13% Price Increase for S&P 500 Over the Next Year

Companies and Earnings

By John Butters  |  July 9, 2018

During the second quarter, the S&P 500 index recorded an increase in value of 2.9%. Ahead of the start of second quarter earnings season, 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 a 13.0% 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 yesterday (July 5). 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 of the companies in the index. On July 5, the bottom-up target price for the S&P 500 was 3093.12, which was 13.0% above the closing price of 2736.61.

S&P 500 Bottom Up Target Price

Sector-Level Breakdown

At the sector level, the Financials (+18.8%), Materials (17.4%), and Industrials (+17.1%) 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 July 5. On the other hand, the Utilities (+2.1%) and Real Estate (3.9%) sectors are expected to see the smallest price increases, as these sectors had the smallest upside differences between the bottom-up target price and the closing price on July 5.

Sector Level Bottom Up Target Price vs Closing Price

Company-Level Breakdown

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 July 5) are listed below.

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

Company

Target

Closing

Diff ($)

Diff (%)

Nektar Therapeutics

101.00

47.54

53.46

112.5%

Xerox Corporation

38.00

24.19

13.81

57.1%

Lam Research Corporation

262.50

171.82

90.68

52.8%

Micron Technology, Inc.

80.00

52.84

27.16

51.4%

Jefferies Financial Group Inc.

34.00

22.62

11.38

50.3%

Western Digital Corporation

115.00

77.46

37.54

48.5%

Norwegian Cruise Line Holdings

67.00

46.62

20.38

43.7%

Applied Materials, Inc.

65.00

45.44

19.56

43.0%

Affiliated Managers Group, Inc.

210.00

148.02

61.98

41.9%

American Airlines Group, Inc.

53.50

37.99

15.51

40.8%

 

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

Company

Target

Closing

Diff ($)

Diff (%)

Twitter, Inc.

32.00

45.06

-13.06

-29.0%

Under Armour, Inc. Class A

16.00

22.07

-6.07

-27.5%

Under Armour, Inc. Class C

16.00

20.75

-4.75

-22.9%

Campbell Soup Company

34.00

41.49

-7.49

-18.1%

TripAdvisor, Inc.

48.00

56.91

-8.91

-15.7%

National Oilwell Varco, Inc.

37.50

43.58

-6.08

-14.0%

Advanced Micro Devices, Inc.

13.50

15.50

-2.00

-12.9%

VeriSign, Inc.

123.00

140.99

-17.99

-12.8%

Cintas Corporation

167.00

189.40

-22.40

-11.8%

Public Storage

207.50

232.71

-25.21

-10.8%

 

How accurate have the industry analysts been in predicting the future value of the S&P 500?

Over the past five years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been -0.3%. In other words, industry analysts have underestimated the price of the index 12 months in advance by 0.3% on average during the previous five years (using month-end values). Over the past 10 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 10.9%. Over the past 15 years, the average difference between the bottom-up target price estimate at the end of the month and the closing price 12 months later has been 9.7%. In other words, industry analysts have overestimated the price of the index 12 months in advance by 10.9% on average over the past 10 years (using month-end values) and by 9.7% on average over the past 15 years (using month-end values).

Bottom Up Target Price vs Closing Price

Download the latest Earnings Insight

John Butters

Senior Earnings Analyst

John’s 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, Financial Times, The New York Times, MarketWatch, and Yahoo! Finance.

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