Barclays Raises S&P 500 Target for 2024 to 5,600, Citing Strong Tech Earnings

Barclays raises 2024 S&P 500 target to 5,600 from 5,300

(Reuters) - Barclays on Tuesday lifted its 2024 target for the benchmark S&P 500 index to 5,600 from 5,300 as it expects strong profit growth for mega-cap technology firms. The brokerage has joined peers like Citigroup and Goldman Sachs in raising their annual targets for the index on hopes of a "soft landing" in the U.S. and an interest rate cut from the Federal Reserve later this year. In February, Barclays bumped up its 2024 target for the index to 5,300, pointing to resiliency in the U.S. economy and robust earnings for Big Tech firms. The fervor around artificial intelligence (AI) and the increased likelihood of a Fed rate reduction in 2024 have driven the S&P 500 to record highs this year. The index closed at 5,564.41 points on Monday and is up 16.6% so far this year. Barclays also raised its 2024 earnings per share (EPS) forecast for index companies to $241 from $235. "While our valuation assumption for Big Tech is high, growth-adjusted multiples are reasonable and we expect the group to earn into its valuations," Barclays strategists said in a note. Major tech stocks, such as the Magnificent 7, which includes Apple and Nvidia , continue to report robust results, but disinflation would pressure earnings for the rest of the S&P 500, Barclays said, although the impact would be smaller. Meanwhile, the brokerage said it has turned "positive" on the utilities sector on expectations of higher earnings growth compared to other S&P 500 stocks. (Reporting by Kanchana Chakravarty and Roshan Abraham in Bengaluru; Editing by Sonia Cheema)

Barclays raises S&P 500 target to 5,600, sees strong tech earnings ahead

Strong earnings from major technology companies should offset declines from other parts of the market heading into year-end, according to Barclays. Strategist Venu Krishna raised his 2024 S & P 500 target to 5,600 from 5,300. That puts Krishna at the median of strategists included in the CNBC Pro Market Strategist Survey . The new forecast implies less than 1% upside from Monday's close. The S & P 500 has already rallied more than 16% year to date, reaching record levels and blowing past many Wall Street estimates. .SPX YTD mountain SPX year to date "Macro moderation is likely to be a headwind for ex-Tech EPS growth through the end of the year; we expect this to be offset by Big Tech continuing to surprise to the upside as it did in 1H," Krishna wrote in a note. Investors have piled into tech stocks this year amid expectations that artificial intelligence would bolster corporate profits. The S & P 500 tech sector is up 29% in 2024, with AI-related stocks Nvidia and Super Micro Computer more than doubling. That said, tech has been under pressure recently, as investors pared positions in the sector and rotated into more cyclical parts of the market such as small-cap stocks. Krishna is unfazed, however. "Recent US equity volatility should end up fairly contained," he said. "Major unwinds seem systematically/technically motivated rather than fundamental (crowded positioning among discretionary funds, systematic equity exposure was elevated, June-July rally was frothy/mostly multiple expansion, market implied probability of a September rate cut was already ~74% prior to June CPI)." There "could be more pain trade to go, but we see it as an opportunity to reset valuations as focus shifts to 2Q24 earnings." Aside from tech, Barclays likes the utilities sector going forward, noting it's the only space outside of technology that "we estimate will generate above-SPX EPS growth in FY24." 6,500 in 2025? Barclays also set its 2025 S & P 500 target at 6,500. That implies upside of 16.8% from Monday's close. Krishna said that, while there's much uncertainty around next year's estimates, "we expect most of the macro inputs to our EPS framework to be smaller (but still negative) headwinds for earnings growth next year.

Barclays raises 2024 S&P 500 price target to 5600 from 5300 By Investing.com

Barclays (LON:BARC) U.S. strategists have raised their 2024 price target for the S&P 500 to 5600 from the previous 5300, citing a slight premium to the current fair value of the index without the technology sector (SPX ex-Tech), and a 34x multiple for Big Tech. The strategists believe that inflation will continue to normalize while the economy remains resilient, and that Big Tech will sustain its leadership in next twelve months (NTM) earnings growth. This results in a 23x multiple of their base case FY24 S&P 500 earnings per share (EPS) estimate of $241. "34x is a reasonable base case valuation for Big Tech, as the group has consistently earned into its multiples over the last several quarters," strategists said in a Tuesday note. "Despite Big Tech's 35% price return year-to-date, P/E remains well off post-COVID peak levels of 37x because of its strong EPS results and upward revisions to forward estimates." Furthermore, Big Tech's growth-adjusted multiples are not seen as overly stretched, Barclays noted. The group's 2-year price/earnings-to-growth (PEG) ratio is not significantly higher than that of the S&P 500, and Big Tech's PEG has been declining year-to-date as the group continues to benefit from several growth vectors, including the second wave of the AI ecosystem. Meanwhile, Barclays' fair value price-to-earnings (P/E) estimate for the remainder of the S&P 500 has increased recently. "SPX ex-Tech is currently trading quite close to our fair value estimate, after trading at a large premium throughout most of 2023," strategists pointed out. Their fundamental valuation framework indicates that the fair value P/E for the S&P 500 ex-Tech is benefiting from cooler inflation and improved manufacturing PMI over the past year, though higher interest rates remain a headwind. As for its bull and bear case scenarios, Barclays said these revolve around the multiples assigned to Big Tech, reflecting the group's significant influence on the US equity market. If Big Tech companies continue their beat-and-raise streak and secure an even higher forward valuation, the S&P 500 could reach 6100 by year-end. In contrast, a drop below already high expectations could push the benchmark index as low as 4950. Strategists also set a 2025 price target for the S&P 500 at 6500, based on 24x their base case 2025 earnings estimate of $268. "While substantial uncertainty surrounds FY25 estimates at this stage, we expect most of the macro inputs to our EPS framework to be smaller (but still negative) headwinds for earnings growth next year, with the exception of weak EM growth," they said. The bank's team believes that the current Street consensus for FY25, which stands at $280, appears overly optimistic. Feel ready to dive into details and start finding interesting stocks to invest? Try our AI supported solution InvestingPro today! Get an extra discount up to 10% by applying the code FTSEINVEST on our 1&2 year plans. Don't wait any longer!