Citi analysts have raised their S&P 500 year-end 2024 target to 5600 while also initiating mid- and full-year 2025 projections of 5700 and 5800, respectively, in a note Tuesday.
According to Citi, "Our full-year earnings estimate is increased to $250 from a long-standing above-consensus $245 estimate. For '25, we initiate a $270 estimate."
Citi's analysis considers three key influences: NVDA, other major growth stocks, and the remainder of the index.
"Valuations can hold into year-end but are expected to compress during '25," Citi stated, emphasizing the significant impact of mega-cap growth stocks on index performance. "The weighting effect of the mega-cap growth cohort is exerting an outsized influence on index price action."
The +14.6% year-to-date return of the index is attributed to the three components: NVDA (4.1%), the rest of the major growth stocks (5.1%), and the "other 493" stocks (5.4%). Citi noted, "The first two components have shown ongoing positive revisions to '24 earnings estimates."
Despite the concentration of gains among a few large stocks, Citi pointed out that "122 stocks have outperformed the index, and over 60% of the index is positive for the year."
Citi's earnings projections include an 8.5% growth in 2025 from their $250 estimated starting point in 2024. They highlighted, "Current bottom-up consensus is for +14% EPS growth in '25. This is too aggressive, in our view."
Citi's outlook provides both a bull case, projecting the S&P 500 could reach 6400 in 2025, and a bear case, projecting a decline to 4700, reflecting potential earnings deterioration and multiple compression.