Goldman Sachs raises S&P 500 price target on earnings strength

(Updated – February 17, 2024 5:31 AM EST)

Goldman Sachs equity strategists raised their year-end target to 5200 from 5100, indicating a 4% potential upside from current levels.

On Friday, the S&P 500 index closed at 5005.56, down 0.4% on the week.

This adjustment reflects raised profit estimates with the new 2024 EPS forecast now sitting at $241, reflecting an 8% upward revision, surpasses the median top-down strategist forecast of $235.

“The nearly-completed 4Q earnings season highlighted the ability of corporates to sustain profit margins despite slowing inflation,” analysts said in a note on Friday.

The optimism is fueled by expectations of stronger economic growth and higher profits in the Information Technology and Communication Services sectors, home to 5 of the “Magnificent 7” stocks.

“The fundamental strength of the mega-cap stocks should also boost aggregate S&P 500 profits in 2024.”

“The clearest upside risks to our EPS forecasts are stronger GDP growth than we currently anticipate or continued upside earnings surprises from the mega-caps.”

Goldman Sachs anticipates that P/E valuation multiples for the equal-weight S&P 500 (16x) and aggregate cap-weight index (20x) will remain stable, underscoring that earnings growth will primarily fuel further upside this year.

On the other hand, the banking giant cites “disappointing growth in the macroeconomy or from the largest stocks” as key risks that would facilitate a pullback in the S&P 500 amid falling earnings forecasts.