With the price of the S&P 500 falling by 17% since March 31 and concerns about a recession rising in recent weeks, 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 price increase of 25.7% over the next twelve months. This percentage is based on the difference between the bottom-up target price and the closing price for the index as of yesterday (September 22). 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 September 22, the bottom-up target price for the S&P 500 was 4,724.28, which was 25.7% above the closing price of 3,757.99.
After falling for six straight months, the bottom-up target price has stabilized over the past two months. From January 31 through July 29, the bottom-up target price decreased by 11.1% (to 4,727.51 from 5,319.28). From July 29 through September 22, the bottom-up target price has stayed within a range of 4,720 to 4,750.
At the sector level, the Communication Services (+37.6%), Information Technology (+31.3%), and Real Estate (+30.8%) 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 September 22. On the other hand, the Utilities (+10.3%) and Consumer Staples (+14.2%) 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 September 22.
At the company level, the ten stocks in the S&P 500 with the largest upside and downside differences between their median target price and closing price (on September 22) can be found below. It is interesting to note that only 12 stocks in the S&P 500 had a median target price that was lower than their closing price on September 22. Five of these twelve stocks are in the Consumer Staples sector.
How accurate have the industry analysts been in predicting the future value of the S&P 500?
In recent months, industry analysts have overestimated the closing price by large margins. On September 30, 2021, the bottom-up target price was 5,049.43. Nearly one year later (on September 22, 2022), the S&P 500 closing price was 3,757.99. Based on yesterday’s closing price, industry analysts overestimated the closing price at the end of September 2022 by about 34% nearly one-year ago.
Over the past five to ten years, industry analysts on average have been within 1% the closing price of the index 12 months later. Over the past five years, Industry analysts have underestimated the price of the index by 0.7% on average (using month-end values). Over the past ten years, industry analysts have overestimated the price of the index by 0.1% on average (using month-end values).
Over longer time periods, analysts have typically overestimated the closing price 12 months later. Over the past fifteen years, industry analysts have overestimated the price of the index by 8.2% on average (using month-end values). Over the past twenty years, industry analysts have overestimated the price of the index by 9.7% on average (using month-end values).
S&P 500: Difference Between Median Target Price & Closing Price: Top 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
DISH Network Corporation Class A |
32.00 |
15.67 |
16.33 |
104.2% |
|
Generac Holdings Inc. |
345.00 |
171.08 |
173.92 |
101.7% |
|
Caesars Entertainment Inc |
72.00 |
37.62 |
34.38 |
91.4% |
|
MGM Resorts International |
55.00 |
30.61 |
24.39 |
79.7% |
|
Warner Bros. Disc., Inc. Series A |
21.00 |
12.01 |
8.99 |
74.9% |
|
Advanced Micro Devices, Inc. |
120.00 |
69.50 |
50.50 |
72.7% |
|
News Corporation Class A |
26.70 |
15.69 |
11.01 |
70.2% |
|
Bio-Rad Laboratories, Inc. Class A |
700.00 |
418.55 |
281.45 |
67.2% |
|
Bio-Techne Corporation |
480.00 |
290.22 |
189.78 |
65.4% |
|
Align Technology, Inc. |
360.00 |
217.95 |
142.05 |
65.2% |
S&P 500: Difference Between Median Target Price & Closing Price: Bottom 10 (Source: FactSet)
|
Company |
Target |
Closing |
Diff ($) |
Diff (%) |
|
Clorox Company |
130.00 |
141.28 |
-11.28 |
-8.0% |
|
Consolidated Edison, Inc. |
89.00 |
96.42 |
-7.42 |
-7.7% |
|
Pinnacle West Capital Corp. |
69.00 |
72.70 |
-3.70 |
-5.1% |
|
General Mills, Inc. |
77.00 |
80.78 |
-3.78 |
-4.7% |
|
Genuine Parts Company |
150.00 |
154.32 |
-4.32 |
-2.8% |
|
Campbell Soup Company |
48.00 |
49.18 |
-1.18 |
-2.4% |
|
Progressive Corporation |
121.00 |
122.42 |
-1.42 |
-1.2% |
|
Twitter, Inc. |
41.00 |
41.40 |
-0.40 |
-1.0% |
|
Netflix, Inc. |
235.00 |
237.05 |
-2.05 |
-0.9% |
|
Principal Financial Group, Inc. |
75.00 |
75.42 |
-0.42 |
-0.6% |
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