S&P 500 Price Targets Get An Upgrade From Barclays

Barclays' team of U.S strategists has recently updated their 2024 price target for the S&P 500, raising it from 5300 to 5600. This upward revision reflects a modest premium to the index's current fair value when the technology sector is excluded. Underpinning their outlook is a 34-fold multiple applied to Big Tech's earnings, suggesting strong confidence in this sector's ability to drive the index's performance.

Analysts at Barclays are optimistic about the prospect of inflation continuing on a path to normalisation. They anticipate the broader economy to display a degree of resilience that supports robust performance across various sectors, including Big Tech. The strategists project that the technology giants are poised to maintain their lead in near-term earnings growth, bolstering the overall index's performance.

In terms of valuations, Barclays' projection equates to a 23-time multiple on the estimated S&P 500 earnings per share (EPS) for the fiscal year 2024, which they peg at $241. Their analysis suggests that when taking growth into account, Big Tech's multiples do not seem excessively stretched. The two-year price/earnings-to-growth (PEG) ratio of the tech giants is in the neighborhood of that for the broader S&P 500, indicating a balanced view of these high-fliers against the overall market.

Beyond 2024, the team has cast their gaze further afield to 2025, setting an ambitious S&P 500 price target of 6500. This projection is premised on a 24-times multiple of the team's base case for the 2025 earnings estimate of $268 per share. However, it's worth noting that their expectations are slightly more conservative than the existing consensus forecast for fiscal year 2025, which stands at an EPS of $280. Barclays' strategists suggest that such consensus estimates may be somewhat on the optimistic side.

The financial institution's forward-looking stance is reinforced by prevailing market conditions and the anticipation of continued corporate earnings strength. Their analysis serves as a bellwether for investors looking to gauge the market sentiment and the potential trajectory of one of the key benchmark indices in the United States. As always, individual investors should consider multiple insights and analyses when building and adjusting their investment portfolios.