Analysts' price targets couldn't keep up with soaring S&P 500 stocks a year ago. Now analysts can't cut their targets fast enough.
The swiftness and magnitude of downgrade in price targets in some S&P 500 stocks is staggering. Analysts have chopped their 12-month price targets by 35% or more for 10 S&P 500 stocks including information technology stock PayPal, communication services play Netflix and consumer discretionary Etsy. The downgrades came in just six months, says an Investor's Business Daily analysis of data from S&P Global Market Intelligence and MarketSmith.
"The bears rarely are in charge so have a hard time letting go," said Nancy Tengler, CEO and CIO of Laffer Tengler Research. "Any positive news may drive another rally but we don't think we get a sustainable rally until inflation shows signs of rolling over."
S&P 500 Price Targets Are Starting To Drop
Souring price targets are just the latest reflection of just how much pain the S&P 500 is in. Already, the index is down more than 20% this year.
But in many ways, S&P 500 analysts are still playing catch-up and are taking it too slow cutting 12-month price targets. In six months, analysts slashed their average S&P 500 price target by just 3.5%. And that means they still think S&P 500 stocks are roughly 30% undervalued next to where the stocks should be in a year's time.
And that could mean more target cuts, and big ones, are coming, says Bespoke Investment Research. "Means analysts have yet to start lowering their price targets much at all," Bespoke said.
And that's certainly the case with some S&P 500 stocks.
Pinpointing The Biggest Target Price Falls
Much of analysts' price target cutting has happened after some S&P 500 stocks' big drops. But it's still instructive to see where the biggest cuts are.
PayPal is the stock that analysts seem to have gotten it the most wrong on. Analysts have slashed their 12-month price target on the stock by 56.4% in the past six months. That's good, except it was late and still too generous. Shares of the company are down 62% just this year. The company's adjusted profit per share is seen dropping more than 15% this year. Surprisingly, though, analysts seem to be treating 2022 like a lost year. They're still calling for PayPal to be worth 119.80 a share in 12 months. If that's right, it would mark nearly 70% upside.
And then there's Netflix. It's another of the S&P 500's worst disasters in 2022, with shares plunging more than 70%. And, as you'd expect, analysts slashed their price target by more than 54% in just six months' time to 205.04. But again, hope springs eternal. That lowered price target is still more than 65% higher than where Netflix stock is now.
Some Covid winners, too, are getting dressed down. Etsy's analysts cut their 12-month price target on the stock by more than half in six months. But even that's not enough to keep up with the crash in the online marketplace for crafts. Shares of the stock are off more than 63% in 2022. Plus, analysts' price target is still more than 60% higher than where Etsy shares are now.
Analysts are taking an ax to price targets. But it's been too little, too late so far. A potentially rough third quarter for the S&P 500 might force analysts to further sharpen their knives for more target cutting.
S&P 500 Analysts Chop These Stocks' Price Targets Most
| Company | Symbol | % ch. in target price in six months* | Sector |
|---|---|---|---|
| PayPal | -56.4% | Information Technology | |
| Netflix | -54.6 | Communication Services | |
| Etsy | -51.3 | Consumer Discretionary | |
| EPAM Systems | -47.0 | Information Technology | |
| Align Technology | -42.2 | Health Care | |
| Ceridian HCM Holding | -39.8 | Information Technology | |
| T. Rowe Price Group | -39.4 | Financials | |
| Carnival | -37.4 | Consumer Discretionary | |
| Target | -36.0 | Consumer Discretionary | |
| Dentsply Sirona | -35.8 | Health Care |
