Citi equity strategists hiked the broker’s year-end price target on the S&P 500 to 4,600 (from 4,500) as the U.S. equity market cleared near-term hurdles. This reflects the raised 2023 S&P 500 EPS projection ($220 vs $215 previously).
“Our new S&P 500 targets reflect a higher soft landing and lower hard landing probabilities. Clearly, we are chasing the tape. However, growing conviction in out-year earnings growth acceleration is a key point of differentiation,” strategists said in a client note.
The strategists also expect stronger earnings growth headed into 2024. As a result, the mid-2024 price target on the S&P 500 is now lifted to 5,000, reflecting the S&P 500 $230 EPS projection for 2024.
“An index P/E above our fair value range can be attributed to the mega cap growth cohort. The implication is that we look to buy pullbacks to position for an earnings growth acceleration call in ’24,” the strategists added.
They also pushed back on the notion that U.S. stocks are overvalued. While growth cluster valuations are high, strategists added that they are supported by fundamental drivers.
“Cyclicals are trading below longer-term averages while Defensives are mostly in line with history,” they further noted.