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.
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.
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).