By Joseph Adinolfi
Equity analysts at Deutsche Bank have raised their 2024 S&P 500 target to 5,500, joining a host of other Wall Street strategists who have expressed greater optimism as stocks have come roaring back from last month's selloff.
A team of Deutsche Bank strategists led by Binky Chadha, the bank's chief U.S. equity and global strategist, announced the new target in a note shared with MarketWatch on Friday. The 5,500 number is 400 points higher than the bank's previous target, and about 4% above the S&P 500's Friday close of 5,303.27, according to FactSet data.
Deutsche Bank attributed the increase to an improved outlook for corporate earnings in 2024, with analysts at the bank now expecting aggregate S&P 500 earnings per share to hit $258 per share this year. This would amount to growth of 13% year-over-year, higher than the Wall Street consensus of 11.1% recently reported by FactSet.
Even if earnings growth doesn't meet Deutsche Bank's target, the analysts expect embedded optimism about the outlook for corporate profits could help drive the S&P 500's price-to-earnings multiple higher. The S&P 500's price-to-earnings ratio currently sits at 20.7, which is above its 5-year and 10-year averages, according to FactSet data.
"We see the earnings cycle having plenty of legs. While all the growth may not materialize this year, we see market confidence in a continued recovery rising by year end, supporting equity multiples," the Deutsche Bank team wrote in the note.
At 5,500, Deutsche Bank's new target represents one of the more bullish forecasts for stocks. Last week, BMO's Brian Belski raised his team's year-end target to 5,600, currently the highest on Wall Street.
Morgan Stanley's Michael Wilson also recently raised his S&P 500 target, saying he now expects the S&P 500 to hit 5,400 by the second quarter of 2025. Although it isn't a direct comparison given the difference in time frames, Wilson's previous 12-month forecast called for the S&P 500 to be down at 4,500 by the fourth quarter of this year.
U.S. stocks have rallied in May, with the Dow Jones Industrial Average DJIA closing above 40,000 on Friday for the first time. The S&P 500 SPX also reached a new record close last week after reversing a pullback that saw the index fall 4.6% from peak to trough last month.
Stocks opened mostly higher on Monday, with the Nasdaq Composite COMP leading the way in early trade, while the S&P 500 saw modest gains, and the Dow Jones Industrial Average traded slightly lower.
-Joseph Adinolfi
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05-20-24 0946ET
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