Goldman Sachs Raises S&P 500 Year-End Target, Cites Profit Growth
Goldman Sachs equity strategists have revised their year-end target for the S&P 500, projecting a potential 4% increase. The new target stands at 5200, up from the previous estimate of 5100. This adjustment reflects boosted profit estimates, with the 2024 earnings per share (EPS) forecast now at $241, marking an 8% upward revision.
Strong Fourth Quarter Earnings Season Spurs Optimism
Goldman Sachs analysts noted the recently concluded fourth quarter earnings season, which showcased corporations' ability to maintain profit margins despite a slowdown in inflation. This development has fueled optimism as expectations for stronger economic growth and higher profits in the Information Technology (IT) and Communication Services sectors continue to rise. These sectors are home to 5 of the market's "Magnificent 7" stocks.
Mega-Cap Stocks Expected to Drive Aggregate S&P 500 Profits
The analysts at Goldman Sachs also highlighted the fundamental strength of mega-cap stocks, predicting a boost to aggregate S&P 500 profits in 2024. They anticipate that the price-to-earnings (P/E) valuation multiples for both the equal-weight S&P 500 and the aggregate cap-weight index will remain stable. According to them, earnings growth will be the primary driver of further upside this year.
Key Risks: Macroeconomic Growth and Largest Stocks
Despite the positive outlook, Goldman Sachs cautions that disappointing macroeconomic growth or underperformance from the largest stocks could present risks that may lead to a pullback in the S&P 500. Falling earnings forecasts would be a key factor to watch in such a scenario.
In summary, Goldman Sachs equity strategists have raised their year-end target for the S&P 500, anticipating a potential 4% increase from current levels. This adjustment reflects heightened profit estimates and an optimistic outlook for economic growth and profits in the IT and Communication Services sectors. However, risks related to macroeconomic growth and the performance of the largest stocks should be monitored closely.
Analyst comment
Positive news. The market is expected to continue its upward trend as Goldman Sachs raises its year-end target for the S&P 500, citing increased profit estimates and optimism in the Information Technology and Communication Services sectors. They anticipate stable valuations and believe earnings growth will drive further upside. However, a pullback could occur if there is disappointing growth in the macroeconomy or from the largest stocks.
